Tyre companies busy charting capacity addition plans on bright demand outlook

G Balchandar Chennai | Updated on February 22, 2018 Published on February 22, 2018

The recent hike in customs duty on TBR tyres will further make Chinese tyre costlier vis-à-vis domestic tyres   -  Reuters

Tyre makers are preparing for the next phase of capacity expansion in view of favourable growth prospects.

The companies see a robust demand outlook in passenger and commercial vehicle segments. Also, fall in Chinese tyre imports on account of anti-dumping duty has helped domestic players improve capacity utilisation levels.

Apollo expansion

Apollo Tyres has announced a ₹1,800-crore plant in Andhra Pradesh for producing passenger car radials. It is also expanding truck and bus radial (TBR) tyre capacity. It is currently producing close to 9,000 TBR tyres per day and it will be expanded to 11,500 tyres by the end of 2018.

Also, its PCR (passenger car radial) de-bottlenecking would be on stream by the end of this fiscal and it is looking to increase the capacity by 10 per cent during this year.

The Apollo management had told its latest conference call that the demand outlook would be positive going forward and strong OEM sales, revival in replacement demand and fall in Chinese tyre imports would drive domestic demand.

JK Tyres

JK Tyres , which has more than 30 per cent market share in TBR (medium and heavy commercial vehicle) tyre segment, is also contemplating greenfield/brownfield capacity expansion for TBRs as its capacity utilisation is close to 100 per cent. In view of the strong demand outlook, the company’s board recently approved fund raising of ₹1,000 crore to support expansion.

Ceat has hit full capacity utilisation levels for both TBR and TBB (truck bus bias) tyre capacities. The company has chalked out a capex of ₹450-500 crore for this fiscal. For the next fiscal, it has increased the capex to ₹1,500-1,700 crore, mainly on account of the requirement for a larger capacity for PCR given the robust demand in the segment. Also, some portion will be invested in TBR capacity, which will come on stream during the third quarter of the next fiscal.

Industry analysts point out that growing preference for higher tonnage trucks, restrictions on overloading and increased government thrust on infrastructure are expected to result in higher sales of commercial vehicle volumes, benefiting tyre players like Apollo, JK Tyres and MRF, among others.

While the replacement demand is also expected to pick up in the coming months, the imposition of anti-dumping duty in September 2017 on Chinese tyres has resulted in lower import of TBR tyres. It is estimated that the TBR tyre import has fallen from 150,000 units per month from pre-demonetisation period to about 50,000 units a month now. Also, the recent hike in customs duty on TBR tyres will further make Chinese tyre costlier than domestic tyres.

Published on February 22, 2018
This article is closed for comments.
Please Email the Editor