India: Tyre companies up prices by 1-3%
Chennai: First it was the car and SUV companies that hiked prices earlier last month and now tyre companies are following suit. A number of tyre companies have already announced price increases including Apollo, Yokohama and Continental while others like Ceat are likely to take a call soon. Tyre companies said the price hikes — in the range of 1-3% on various segments — is mostly to compensate for increase in raw material prices.
“We have been increasing prices across the range in a phased manner since February. The same will conclude by May end. Different categories will be hiked on different dates. During this phased implementation, the extent of increased weighted is approximately 1.5-2%,” said Satish Sharma, president –Asia Pacific, Middle East and Africa, Apollo Tyres. The markup, he said, is in response to increasing raw material prices. In fact, the current hikes don’t cover the actual increase so there may be more price increases in the future.
“This increase is insufficient to offset the raw material cost and energy cost increases and we may need to look for another round of increase in the short term provided the competitive intensity of the market allows for the same,” said Sharma.
Continental too is increasing prices by up to 3% by May 16. While Yokohama India sent an intimation to its dealers that it will increase tyre prices on different categories by 1-2.5% with effect from April 29, said SP Singh of the AITDF (All India Tyre Dealer Federation). CEAT’s executive director Arnab Banerjee said that, “While rubber prices have softened, crude remains a concern. There could be some minor price escalation on account of raw material price hike and it is likely to be 1% or lesser.” Tyre major MRF, which saw a 25% drop in net profits in FY18, has also cited concerns over crude based inputs.
However dealers say the hikes don’t follow the price curves of raw materials. “Tyre prices are prevailing at the level when natural rubber touched the peak of Rs 242/kg and now it has come down to Rs 112/kg (RSS 4 grade). Crude oil based inputs like synthetic rubber, carbon black, nylon tyre fabric and rubber chemicals are based on crude price level of $115/bbl in 2013.When crude price plummeted to $40/bbl and crude based inputs also came down, tyre prices, which were earlier raised by 22-30%, were not rolled back. Even now crude is at $74/bbl, lower than previous peak of $115/bbl,” said AITDF’s Singh.