As demand from the auto market slows down and the cost of natural rubber drops, tyre prices are now expected to remain steady over the next few months.
This is after nearly all major tyre makers, such as Apollo, JK Tyres and Ceat, have increased product prices by almost 8-10 per cent across 3-4 tranches in this year itself.
“If input prices are softening and the demand is also low, it is unlikely that the prices will be revised upwards. Performance of tyre companies in the first quarter saw a drop, so lower input costs should bring them back into the black,” a senior tyre-industry source told Business Line.
He added that apart from demand from carmakers being flat, aftermarket (tyre replacements) sales have also come down as customers are deferring purchases on a poor market sentiment. Demand for commercial vehicles is not as bad, though even their sales growth has moderated to single digits.
According to the Ministry of Commerce and Industry’s Rubber Board, prices of natural rubber (RSS 4) have now come down to Rs 214 a kg, from a peak of around Rs 245 a kg a few months ago. However, the industry would be more comfortable if prices were to come down to Rs 180-190 a kg.
“An increase in prices is unlikely over the next few months, especially as rubber prices have come down. The market is not in a condition to absorb higher prices. However, if the rupee devalues significantly and imports become expensive, then we may have to look at our product prices,” Mr Anant Goenka, Deputy Managing Director, Ceat Ltd, said.
Rubber prices have reduced because of improved supplies in recent times — Kerala saw a few days of tapping in September, which is not usually the case. Moreover, because of good rains this time, production is now expected to go up.
JK Tyre expects to take a call on product prices in the first week of October. It is waiting to review the demand situation and hoping that crude oil and rubber prices settle down for a longer period.
“Some softening has happened in natural rubber prices, but cost of other input materials, like carbon, fabric and synthetic rubber, have not come down as yet. Prices could go up to improve margins, but we have to judge the market response and decide,” said Mr A.S. Mehta, Marketing Director, JK Tyre & Industries.