Cheap Chinese Imports Worry Indian Tyremakers

(Akron/Tire Review – India Business Standard) With the Indian tyre market being flooded with cheaper Chinese bus and truck tyres, the domestic tyre industry is up in arms about the under-invoicing of these imports and their inferior quality.

Currently, Chinese-made bias tyres (non-radial tyres) are available at Rs 8,500-9,500 ($213 – $238) a tyre while Indian bias truck and bus tyres range between Rs 10,500 and 12,000 ($264 – $301). The replacement tyre market is currently pegged at 6.5 lakh (650,000) units a month. Of these, Chinese bias tyres account for 70,000-75,000 and are growing rapidly.

Questioning the low-price of these imported tyres, an industry expert said, “With global prices of raw materials such as natural rubber being in tandem with the Indian prices, and raw material amounting to 60 per cent of the cost of the tyre, such a difference is not possible except in the case of these tyres being of inferior quality or under-invoiced.”

Although the government levies an anti-dumping duty of $135 a tyre on the Chinese imports, it has not been able to address the issue of under-invoicing and inferior quality tyres.

According to an industry source, the average invoiced price of a Chinese imported tyre is in the range of $85-$105 (Rs 3,500-Rs 4,020). “With such a low price to start with, they keep paying lesser taxes at all levels including customs. Moreover, the sales of these tyres are hardly ever recorded and so the retailer evades the Value Added Tax (VAT) of 12.5 per cent.”

According to Rajiv Budhraja, director general of the Automotive Tyre Manufacturers Association (ATMA), the evasion of VAT alone costs the exchequer about Rs 6 crore ($1.5 million) every month.

The data from ATMA says that the Chinese imports have increased by over 30 per cent during April-June 2007 as against the same period last year. Chinese imports constitute around 12 – 13 per cent of the total replacement tyre market and around 9 per cent of the total tyre market in the country and are growing rapidly.

According to data from the Directorate General of Commercial Intelligence and Statistics, Chinese imports of truck and bus bias tyres into India stood at over 7 lakh (700,000) units during 2006-07.

“Rampant negligence by customs authorities is promoting the imports of these Chinese tyres. All these under-invoiced tyres evade them. The custom machinery needs to verify the consignment properly and build better co-ordination otherwise our interests will continue to get damaged,” said A.S. Mehta, marketing director, JK Tyre.

Moreover, the import duty on tyres has been reduced to 10 per cent in 2006-07 but the import duty on natural rubber, a key ingredient in the manufacture of tyres, has been maintained at 20 per cent for the past three years.

“The present duty structure is discriminatory to tyre manufacturers and helps only imports. This duty should be brought down so as to create a level playing field,” said Budhraja.

Another trend in practice is that since the anti-dumping duty of $135 per tyre is treated as the reference price, it is leading to import of more radial tyres under the name of bias tyres.

The average invoiced price of a Chinese radial tyre is around $160 and it is exempted from the import duty, but the tyres are exported in the name of bias as exporters avail the anti-dumping duty, thereby utilising under-invoicing to the maximum. Structurally, it is very tough to differentiate between a radial tyre and a bias tyre, a source from the tyre industry said.