With the US imposing anti-dumping duty on Chinese tyres, imports of such tyres into India has surged over the past several months, adding to pressure on Indian tyre makers.
At a basic custom duty of just 10%, Chinese tyres have flooded the local market. These tyres are much cheaper than locally produced tyres sold under Indian brands.
Chinese tyre imports rose 31% to Rs 613 crore by late 2014 as against Rs 468 crore recorded in the 2012-13, according to industry watchers. As per estimates, total value of Chinese tyre imports must have closed in around Rs 800 crore by the end of last financial year.
This has added to the financial pressure on Indian tyre makers despite the cost of natural rubber being benign since the last few months. Raw material cost as a %age of sales has declined to 57% for MRF, India’s leading tyre maker, from 66% earlier.
“Recovery in demand from OEMs has been slower than expected. Additionally, surge in import of cheaper Chinese tyres is eating into the share of domestic players, including MRF, in the replacement market. However, although volumes are expected to continue to remain under pressure in the near term, we expect MRF to sustain itself against the Chinese imports and maintain a stable position in the replacement market owing to its diversified product mix and leading position in the segment”, stated a report from Angel Broking.
In its pre-budget submission, Automotive Tyre Manufacturers’ Association (ATMA), the umbrella body for tyre makers, stated that the total import duty on natural rubber is 20% while tyres can be imported at a rate of 5% or even nil rate under various Trade Agreements. Under SAFTA, tyres can be brought in at 5% duty from Pakistan and Sri Lanka.
The industry had asked for an increase in import duties on tyres before the budget presentation. International Trade Advisory Services (ITAS) had stated that more than 60% imports of truck and bus radials is taking place from China at an average unit value of US$106, which is lower than raw material price.
According to Raghupati Singhania, chairman of ATMA, imported tyres now constitute almost 20% of the total Indian market, with China being the largest supplier.
According to estimates, Indian tyre makers are expected to post a flat top-line growth in the final quarter of last financial year due to weaker volume growth in the passenger, tractor and two-wheeler (2W) segment and due to stiffer competition from the cheaper Chinese imports.