India Tyre Prices Rise by up to 7% as Demand Revs Up

Car and two-wheel vehicle tyre prices in India have recently risen by some five to seven per cent due to unprecedented demand and reduced manufacturer inventories. According to India’s The Economic Times newspaper, tyre manufacturer’s inventories have declined from 20-25 days to just 5-7 days of late, disrupting vehicle production. The price increases mean that vehicle manufacturers also need to absorb the additional cost of around Rs 800 (£10.75) in each new car they sell.

“There has been an unprecedented demand for tyres from various automakers and we are trying to meet it with all our plants operating at full capacity,” said AS Mehta, director for marketing at JK Tyres & Industries. According to analyst estimates, vehicle production may drop five to ten per cent due to the tyre supply situation. “There is a demand-supply mismatch. While production has increased in the past few weeks, the supply of tyres has not kept pace, resulting into shortages. We have asked tyre companies to augment supplies but that has not happened yet,” a senior Tata Motors executive told the newspaper.

On condition of anonymity a senior executive from a tyre company in India explained: “Tyres is a capital-intensive industry and there has been no major capacity addition in a year due to slowdown in the market and economic recession. While sales have jumped in recent months, production has not increased to that level, leading to shortages.”

Supplies are expected to be boosted by additional capacity in coming months. According to The Economic Times, India’s tyre industry produces 1.2 to 1.4 million car  tyres per month, of which around 60 per cent is supplied to new car manufacturers.