Cheap Imports and High Costs Forces Indian Tyre Firms to Downsize

(India/Rubber Asia) Cheap imports from China and to a lesser extent from Thailand and South Korea, coupled with rising raw material costs are posing a serious challenge to the Indian tyre industry, Apollo Tyres chief operating officer Mr Neeraj Kanwar has said.

In just three years, tyre imports into India have tripled and now represent roughly six per cent of the market. While Korean and Thai tyres haven’t been quite as big a threat, low-priced Chinese imports are slowly beginning to swamp some of the Indian market segments, Mr Kanwar told the media at Kochi.

Before such imports had not been suitable for the Indian roads but now things are changing. In fact, the Chinese have recruited experts from Indian companies to make tyres that are specifically “cut out for the Indian conditions”, he added.

“The Indian government policy isn’t helping our cause either,” he said, referring to the 10 per cent customs duty on imported tyres at a time when the duty on imported rubber is still 20 per cent. It is a cruel irony that a finished product invites less duty than a raw material used in making it, according to observed Mr Kanwar. To add to the burden, the crude prices, which dictate the cost of several other crucial raw materials, aren’t easing.

The COO said as much as 20 per cent of the raw material cost is accounted for by rubber. Though the government has reduced the excise duty on tyres from 24 to 16 per cent, the Indian tyre companies simply cannot afford to pass on the benefit to consumers because of all the cost constraints.

”In fact, we are seriously thinking of paring down our payrolls. We are working on voluntary retirement schemes for employees in all the three units of Apollo and improve productivity with a reduced workforce. That’s the only way to go,” said Mr Kanwar.