Lower Vehicle Sales, Imported Tyres Hammering Indian Manufacturers
A slowing demand for new vehicles in India has prompted led to OE tyre supplies from manufacturers based in the country to reduce by as much as 70 per cent. And the story is not much better in the aftermarket sector, reports the Automotive Tyre Manufacturers Association (ATMA), who says that cheaper imported Chinese made tyres are also having an impact.
“While the slowdown in the automobile sector has impacted the OE business, cheap imports and large scale dumping of tyres from China has created havoc with the replacement segment, forcing the tyre industry to go for production cuts,” said R P Singhania, who is chairman of both JK Tyres and the ATMA. All major Indian and multinational tyre companies, including Apollo, Birla, Bridgestone, Ceat, Goodyear, JK Tyres and MRF, are proceeding with production cuts of varying intensity in view of slowing demand.
“Our supplies to OEs is down by 70 – 75 per cent on account of a heavy cut in production announced by vehicle makers,” said CEAT managing director Paras Chowdhary. “The OE segment accounts for 25 per cent of our entire business. We have also witnessed a dip of 5 – 10 per cent in demand in the aftermarket.” The company’s vice president, Arnab Banerjee, added: “We have cut production at our plants in last few months and it will be shut for five to six days in December. We will review the situation and decide on our strategy for January.”
Mr Koshy K. Varghese, executive vice-president of MRF Ltd, said, “It makes fiscal sense to cut production to avoid building up inventory. We will resort to cut in production across our plants, but there will be no retrenchment of employees.” The company declared a lockout at its Arakonam factory in Tamil Nadu due to labour issues. The company recently also cut production at the plant, and at its Tiruvottiyur facility.
Birla Tyres has closed its plant at Balasore in Orissa for a fortnight due to slump in demand. In a memo sent to employees, Birla Tyre senior president D. Tandon said that it was impossible to continue normal operations at the plant under the current circumstances.
A.S. Mehta, marketing director at JK Tyre & Industries, said original equipment demand to November for heavy vehicle tyres has declined 60 – 70 per cent and for cars it is down 20 – 25 per cent. “Due to the sharp drop in demand we find that our working capital, particularly inventories, and debts have increased and there is a serious liquidity crunch in the market not to mention the credit squeeze from the banking sector,” said another tyre company official.
This drop in demand is also having a knock-on effect in the rubber industry, commented ATMA chairman Singhania: “The tyre industry is the single largest consumer of natural rubber in the country, accounting for about 58 per cent of total natural rubber consumption. The fall in demand for tyres is getting reflected in low offtake of natural rubber in the country, notwithstanding the prevailing lower prices.”
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