Tyre companies preparing to raise prices following massive surge in rubber prices

The Indian tyre industry is currently facing serious challenges due to a sharp increase in raw material prices. According to a Mint report, a significant decline has been witnessed in the profit margins of tyre manufacturing companies due to a surge in the prices of natural and synthetic rubber. To cope with this situation, companies are now considering further increasing tyre prices. Rubber is a crucial component accounting for approximately half of the tyre production cost, which is why fluctuations in its price have a direct impact.

Adverse weather and the ongoing war in West Asia are primarily considered responsible for this price hike. Bad weather in Kerala and key producing regions of Southeast Asia has driven up natural rubber prices, while the impact of rising crude oil prices due to the West Asia conflict has fallen on synthetic rubber. Due to the increase in crude oil prices, the price of Brent crude is now around $105 per barrel, compared to $65-70 when the conflict began.

According to Anshuman Singhania, Managing Director of JK Tyre, the company's input costs have increased sequentially by 9% and a further 4-5% increase is likely in the current third quarter. The company has increased its revenue from tyre sales by 11-12% over the last six months and plans a further 4-5% hike in the December quarter. In JK Tyre's September quarter results, EBITDA fell 36% to ₹343 crore and net profit dropped 73% to ₹60 crore. However, the company's revenue rose 20% to ₹4,850 crore.

Kumar Subbiah, Chief Financial Officer of CEAT, stated that despite raising tyre prices over the last six-seven months, it has not fully offset the raw material costs. Therefore, the company still plans to raise prices. CEAT's profit declined 40% to ₹112 crore and EBITDA fell 11% to ₹452 crore. Apart from rubber, companies have also been affected by rising prices of carbon black, chemical additives, silica, and steel.

According to the Rubber Board of India, India consumes 22.8 lakh tonnes of rubber annually, out of which 35.5%, meaning 8,09,000 tonnes of rubber is imported. Experts believe this upcoming increase in tyre prices will not have a major impact on automobile prices during the festive season. Companies are now focusing on disciplined price adjustments and increasing efficiency.

Ths tyre industry is a vital part of the auto manufacturing sector, producing tyres and tubes required for vehicles. This industry includes leading companies like Apollo Tyres, CEAT, and JK Tyre, which export and sell tyres in domestic and international markets.