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News Uploaded On : Monday, May 07, 2018 10:47:00 AM IND Back  |  Latest Projects  |  Latest Tenders
 
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Tyremakers in India line up aggressive capacity expansion plan
Tyremakers in India have lined up an aggressive capacity expansion plan to meet the growing demand from automobile manufacturers and replacement market after fully recovering from demonetisation and the GST (goods and services tax).

A total of Rs136.4 billion is expected to be pumped in by the tyremakeres over the next 7-10 years. A substantial portion of this expansion, the first in the past five to seven years, would be used for creating greenfield facilities.

RPG Group’s Ceat Tyres plans to increase its existing output by 35-40 per cent. Besides ramping up its capacity for bus and truck radials at its Halol plant in Gujarat, it plans to set up a greenfield unit for passenger car radials, said Anant Goenka, managing director at Ceat. Ceat has earmarked an investment of Rs12-15 billion. “The demand from replacement segment as well as the original equipment manufacturers (OEMs) has been quite strong,” Goenka said.

Fuelled by a record two-wheelers and truck volumes, automobile sales in India have been expanding at a brisk pace month-on-month. The industry produced a total 29 million vehicles, (including all segments) a growth of 14.78 per cent over the same period last year, according to Society of Indian Automobile Manufacturers (Siam).

A strong order book from the export and domestic markets, government’s stance on anti-dumping regulations and a relatively stable natural rubber price have boded well for the tyremakers. But a soaring crude price is set to mount pressure on profitability from the current quarter itself for most companies. Crude-based raw materials such as carbon black, account for close to 45 per cent costs for tyre firms. Crude prices have risen from an average $62 to $75, Goenka said.

But with robust demand from across all segments, most tyremakers have been passing on the incremental costs through price hikes, analysts said. “We expect raw material costs to increase by 3-4 per cent over the next two quarters due to recent increase in crude prices, which will require price increase of 2-2.5 per cent,” Nishit Jalan and Hitesh Goel, analysts at Kotak Institutional Equities, said in a report.

Ceat’s rivals MRF and Apollo Tyres, too, have been stepping on the gas with expansion with their facilities. In its first big expansion outside Tamil Nadu, MRF, a leader in bus, truck radial and two-wheeler tyres, has earmarked an investment of Rs 45 billion in Gujarat over the next decade. It will be firm’s ninth unit. Varghese Koshy, executive vice-president, MRF, could not be reached for a comment.

In January, Apollo Tyres said it was pumping in Rs 18 billion in a new factory in Chittoor, Andhra Pradesh. With a capacity to make 5.5 million tyres a year, the unit will feed domestic and export markets and will go on stream in the next two years.

The investment in AP was part of a Rs 45-billion capex outlined for 2017-18 and 2018-19. “The expansion in Chennai, is almost through,” said Apollo Tyres spokesperson. The Chennai unit can now make 120,00 radials.

Rajiv Budhraja, director general at Automotive Tyre Manufacturers Association, said the expansion was overdue on two counts. First, the 5-6-year-old facilities had become saturated. Second, since the last couple of years, the demand from auto firms was weak and the demand in the replacement market was affected due to the GST and note ban, he said.

BS

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