Tyre industry on rough terrain

  • Jul 16, 2013
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The continuous slowdown of the automobile industry has led to a decline in demand for tyres from car makers

All-terrain tyre

With automobile sales showing a decline for the eighth straight month, the tyre industry is not optimistic about the prospects in the current year. Since the weak sentiment is likely to continue, the industry is reworking its production strategy and expecting incentives from the government to boost sales. 

While the original equipment (OE) segment has fared worse, the replacement tyre sector has done well in the commercial segment. In effect, the replacement sector seems to be driving the industry now. 

"The sluggishness in the automotive segment is a concern for us. However, there is demand for our products in the replacement and export markets. As a strategy, our production is tuned to the market requirements," said Satish Sharma, chief of India operations, Apollo Tyres. According to him, demand for the company's tyres in the replacement market continues to remain strong. 

The tyre industry has been going through a rough patch for over a year. It was expecting some movement in the second quarter, which has not happened till now. The drop in demand in the passenger car and two-wheeler section is over 50%. "The monsoon season is not a good time for vehicles as a rule. But people seem to be postponing purchases further," said Rajiv Budhraja, director general of Automotive Tyre Manufacturers' Association. 

Car Tyre

There seems to be a good demand in the replacement tyre segment of light commercial trucks in Kerala. "Since construction activities are going on, demand for tyres of these vehicles has been good,'' pointed out Mohan Zacharia, MD of New Bharat Tyres, a leading dealer in the state. 

Satish Sharma maintained that the demand could pick up during the festival season in both the original equipment and replacement segments. However, the industry expects the government will provide incentive packages to rejuvenate the sector, particularly the OE segment. 

"It could be in the form of excise duty benefits or more directly for the replacement of a decade-old vehicles with new ones offering more fuel efficiency and safety," Budhraja said. 

Unless the government provides some benefits, the third quarter does not look promising for the tyre industry. 

Tyre companies are keeping a low inventory now hit by both the sluggish demand and the rising price of natural rubber in the domestic market.

Also read: Four Wheeler Tyre Guide

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