Tyre makers set to hike prices again as raw material, fuel costs increase
Operating margins under pressure
Tyre manufacturers such as Apollo Tyres and JK Tyre have decided to increase prices due to the rise in raw material costs and fuel prices.
Fuel price is one indicator, but as raw material is a derivative of crude oil and it is up by about 40 per cent over last year, we need a price increase of about 25 per cent. We have already done about a 10 per cent so far…the margins are under pressure, and we need to pass on the price hike to the customer
He said quarter-on-quarter, the company tries to maintain the margins, but they continue to hurt. “There are a couple of quarters, which are painful from a margin standpoint because of the raw material costs. Rubber is ruling at ₹173 a kg, against ₹120 last year…all the commodities are going through a supercycle,” he said.
Sharma said ocean freight too has gone up anywhere between five and seven times, depending on the destination and because of the diesel price increase the freight rates in surface transport are also up.
Raghupati Singhania, Chairman and Managing Director, JK Tyre, said, “The rising inputs costs have impacted operating margins. This could be partially mitigated through enhanced volumes and selective price increase.” But, he did not divulge when the price increase would happen.
According to SP Singh, Convenor, All India Tyre Dealers Federation, tyre dealers are not happy with the manufacturers because they are making lesser margins in the aftermarket.
“Last time, when the crude oil price was at $115 a barrel, they (manufacturers) raised the prices multiple times. But, when it had fallento $35-38 a barrel, they did not reduce the price. Now, again the crude oil price has increased to around $85 a barrel and they talk about price hike. This is hurting the end consumers,” he said.
He said the government has also restricted imports with anti-dumping duty, which should be lifted so that the costs come down and there is a level playing field. And, imports are not coming only from China but 35 other countries.
Reference: Business Line