Tepid auto sales may force tyre firms to cut production

The forecast of a poor growth in passenger vehicle sales this fiscal may prompt a production cut by tyre companies. The tyre sector has already reduced its inventory as it has struggled with a dull demand almost throughout the year. 

The passenger vehicle segment is expected to grow by a paltry 1% while commercial vehicles are predicted to show a negative growth during 2012-13. "It is a matter of serious concern for the tyre industry. Scaling down of production by tyre companies is a possibility," said Rajiv Budhraja, director general of Automotive Tyre Manufacturers' Association. 

Most of the tyre companies are keeping a lower inventory stretching to three weeks as demand continues to be muted. Earlier, the inventory would be for about two months. The original equipment segment has been a disappointment while the replacement tyre sector has fared only marginally better, according to industry sources. 

Tyre companies are still hoping that positive steps such as interest rate cuts and a fillip to the mining and construction sector will revive the tyre sector. "While we expect a modest growth in all segments, in my opinion, the passenger vehicle segment will recover the fastest. There is not much headwind in the replacement market," said Satish Sharma, chief of Indian operations of Apollo Tyres. 

Though international prices have moved up, sluggish demand has not helped the cause of tyre exports. Major markets like the US and Europe have not shown much growth this year and currency problems have affected shipments to Latin American countries. 

But major companies with operations abroad find it easier to promote tyre exports from overseas facilities.

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