Tyre Prices Shooting Up In India
There has been an increase in the prices of the car tyes. And the 7 per cent increase for the tyre price is because of the high demand and low supply. The car owners actually need not spend an extra 5 to 7 per cent. But it is the carmaker who needs to shell out an additional cost of Rs.800 for a new tyre for every new car they sell.
A deficiency of tyres in the market has become the reason for decrease of inventories at tyre makers to just 5-7 days from 20-25 days. And this is seriously affecting car manufacturers such as Maruti Suzuki, Hyundai Motor India, Tata Motors, General Motors India and Ford India. There isn't any clear information on how much are the carmakers affected by this 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 executive at Tata Motors said.
Auto makers assume that tyre companies are charging arbitrary prices. But the tyre makers are of the opinion that they are trying to meet the demand despite production constraints.
"Tyres are 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," said a senior executive of a tyre company on condition of anonymity. It is expected that the price will be dropped once the festival season is over and the demand for cars come down.
JK Tyre to invest Rs 500 crore towards capacity expansion
JK Tyres has announced its plans to invest about Rs 500 crore towards expansion, over the next 18 months. The aim is to expand domestic tyre production capacity to more than nine million tyres per annum.
Due to a slowdown in demand, JK Tyres was actually forced cut production by about 5% last year - against an installed capacity of 8.8 million tyres, the company only produced 7.54 million tyres. However, the company wants to go ahead with expansion plans to make sure it's in a strong position when the market finally revives.
JK Tyre, which had earlier invested Rs 300 crore in its truck radial tyre manufacturing facility in Mysore, will invest another Rs 315 crore to bring up capacity to 1.2 million tyres per annum. The company will also invest Rs 120 crore in its other plant in Mysore, which makes off-road tyres.
Finally, Rs 50 crore will be invested in JK's car radial tyre manufacturing facility in Gwalior, to increase capacity to five million tyres per annum. Over the next one year, JK Tyres aims to expand into North American and Latin American markets.
[Via: indiaautomotive]
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