5.3% growth for India’s tyre industry in previous financial year

In its July 2012 report into India’s tyre industry, ICRA Research Services states that “changing revenue mix and softer rubber price” will “pay dividends.” The investment and credit rating agency observes that rubber prices have declined from their peak of around Rs 240 (£2.79) per kilogram at the start of the 2011-12 financial year (April 2011), easing to approximately Rs 195 per kilogram in November and then stabilising at between Rs 185 and Rs 200 per kilogram.

This easing of natural rubber prices played a part in helping India’s tyre makers grow despite a slowing economic environment; growth of 5.3 per cent was recorded during the 2011-12 financial year, ICRA reports. Other contributory factors include a growth in exports – revenues for exports rose 46 per cent in 2011-12 – which provided a counterbalance to muted demand from OEM customers and a decline in replacement market volumes. Tyre makers’ revenues increased 28 per cent, largely due to a 20 per cent increase in realisations and the rupee’s strong depreciation.

Despite a slackening of natural rubber prices, the general trend for raw materials was upwards. Synthetic rubber prices, for example, rose 35 to 40 per cent in the 2011-12 year, and although manufacturers implemented numerous price increases during the 12 month period, ICRA says the operating margins of several tyre makers – Apollo Tyres, Goodyear India, JK Tyre and MRF were four companies named – contracted by approximately 180 basis points. Price rises continued in the first quarter of the 2012-13 financial year.

“We expect the demand for tyres from the OEM segment to be relatively muted at eight to nine per cent during 2012-13, despite anticipated revival in replacement volume, driven by vehicles, particularly truck and bus tyres, sold post the recessionary dip of 2009,” said ICRA. “Revenue growth for tyre companies is also expected to be supported by price revisions of around five to eight per cent and continued export thrust to Southeast Asian countries.”