The skyrocketing prices of petroleum and natural rubber is putting pressure on leading tyre manufacturers and dealers who are planning
the next round of price hike.
Leading tyre manufacturers and tyre dealers present at the Automechanica Exhibition in Dubai told 'Emirates24|7' they are expecting tyre prices to go up further in tune with the international rubber price movement and the price of petroleum products.
Rubber dealers said globally the demand for tyre is highest in summer, as many drivers change their tyres for safety reasons and construction activities, transport and agricultural activities revive after the rainy seasons.
TH Venkatesh, General Manager, Exports, JK Tyre and Industries, an Indian tyre manufacturer, said: “In the last six months, tyre prices have
increased a couple of times because the global price has been going up and the petroleum price movement also impact tyre production cost. Natural rubber price has gone up from $2.5 per kilogram to $5 a kg. Oil price also has gone up from $67 per barrel to $100 now. "Natural rubber accounts for 50 per cent of tyre production cost and the remaining 50 per cent is from petroleum products such as carbon black, synthetic rubber, nylon and other by products of the petroleum industry.”
JK Tyres is a $1.5billion tyre company with manufacturing plants in India, Mexico, Vietnam and China.
Venkatesh added that the French tyre manufacturer, Michellin, has already announced a 12-per cent increase in tyre prices. Michelin Africa,
India and Middle East (AIM) has increased prices of all its product ranges in Africa, India and Middle East - all motorcycle and scooter
tyres will increase by up to eight per cent; and all truck tyres, accessories, tubes, flaps and treads will increase by up to 12 per cent;
all passenger car tyres will increase by up to eight per cent; all agricultural tyres, backhoe and skid-steer tyres will increase by up
to 7.5 per cent. All earthmover, TP and industrial tyres as well as accessories will increase by an average of six per cent. The price
increases reflected the raw material escalations up to January 2011. He said other leading tyre manufacturers are likely to follow suit, as
Michillen price increase of 12 per cent will be effective July 1, 2011.
“Multinational tyre companies have annual contracts for rubber supply and can increase prices. The first quarter performance of tyre
companies have been not very good and for JK Tyres, there was only one per cent profit. Out of Rs6,000 crore turnover, profit was only
Rs61crore, he added. “Tyre is a necessity and not a luxury. To cope up with price increases, customers go for rubber retreading or opt
for cheaper products from China or people move away from branded products to non branded products,” he added.
Kurian Abraham, Editor, 'Rubber Asia', a rubber and tyre magazine, said the tyre and rubber product prices are bound to go up as there has
been a pressure on raw material prices. “Almost all the Indian tyre manufacturers have increased prices in the last six months and may
have to increase prices further to match the raw material price escalation. Most of the tyre manufacturers have first reduced the
discounts and offers they used to give. Then they have increased the prices. A 10 to 20 per cent increase in tyre prices have already
happened and as long as oil price remain high and the global economic situation does not aggravate further, rubber prices will remain high.”
He added that price increase may not affect the demand for tyres, because it is an essential product, and not a luxury. “There could be
consumer resistance for a substantial price increase by big companies,” he added.
Shriram, from Tyre Division of Dynatrade, Dubai, said customers now prefer relatively cheaper and efficient tyres and don’t go for branded
tyres, while big companies get their supply on long term contracts and cannot increase prices. “Leading Japanese manufacture Yokohoma has increased tyre price by eight per cent in June 2011. Now the Japanese and Chinese product prices are similar. “Tyre prices have gone up by at least twenty per cent in six months and may go up further. Now there could be customer resistance too as the demand has been affected by the ongoing unrest in the region,” said another tyre dealer. The demand for Chinese tyres has been going up, he added.