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Tyre production may drop on dull auto business
Posted on 14 Jun 20121,781 Views Comments
Tyre production went up by 5% in 2011-12 with passenger car tyres showing a 4% growth. Sales in April were okay but have declined in May and June
A drop in passenger car sales is forcing tyre makers to trim production or step up export to keep the inventory in check. Automobile companies have reported poor sales in the current quarter and there is speculation that demand will remain flat in the coming months with a soaring fuel bill and a rise in interest rates.
"There is a strong possibility of a cut in tyre production if vehicle sales continue to be negative. Several car companies have already cut output due to a weak demand," said a senior officer of Ceat Tyres. Tyre production went up by 5% in 2011-12 with passenger car tyres showing a 4% growth. Sales in April were okay but have declined in May and June.
"While OEMs have scaled down their operations, the replacement tyre market hasn't shown significant buoyancy," said Rajiv Budhraja, director general of Automotive Tyre Manufacturers' Association. To avoid a cut in production, companies will consider raising the exports as the rupee-dollar rate favours shipments.
Apollo Tyres, which is not trimming production, is planning to export more. "Our units will continue to produce at near 100% capacity and we would utilise the extra capacity to service the demands of the replacement and export markets where we are unable to meet the requirements due to capacity constraints," said Satish Sharma, chief of India Operations, Apollo Tyres.
The company, having a focussed export strategy, clocked a 60% growth in exports in the last fiscal. Vikram Malhotra, vice president, marketing and sales of JK Tyres, said: "We think exports will provide us a window of opportunity to deal with excess production due to a sluggish demand in the domestic market." Rajiv Budhraja says the export strategy may work as tyre companies are not dependent on Europe, which is facing a debt crisis.
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