On a rugged road
By Nisha Das | 04 Oct 2003
Mumbai:
The Indian tyre industry is set to experience a shakeout
as the industry is entering its second round of consolidation.
The
tyre industry, which had about 12 players until a few
years ago, has narrowed down to six to seven major players;
these will further dwindle as corporates are forced
to consolidate to face the competition.
All-India Rubber Industry Association president Anil K Sampat says the tyre industry, plagued with an average 8-per cent drop in prices and increasing raw material costs, will now go into its second phase of consolidation.
He adds: "Tyre companies'' per-unit cost with auto majors is fixed. Which means, even if the rubber prices shoot up, we have to bear the brunt with the auto companies unwilling to share the increase in cost. Besides, the government is supporting the growers'' domestic rubber prices, which has already been increased substantially. All this has made non-viable for tyre majors to continue production here."
Says MRF director K M Philip: "For the past five years, the tyre industry has been struggling and the first-round consolidation is just over. The high raw material cost and unstable oil prices have emerged as major threats to the industry and if they continue on the current level, the tyre industry may face a second round of consolidation."
Says a senior JK Tyre official: "The tyre industry is seeing several changes and the consolidation phase will continue. Compared to foreign countries, the cost of production in India is high. Besides, the import of cheap truck tyres has created some damaging effect on the truck tyre market."
The Indian tyre market is valued at around Rs 10,000 crore. The industry sweepstakes are pegged with four major players at the top, two medium-scale ones and a few small-time operators.
Sampat
says the current industry scenario will force tyre companies
either to move their production base outside India or
be forced to shot shop. "The high input price hike
and increasing competition are the major threats to
the industry."