Tyre companies have increased prices by two to five per cent on rising raw material costs and margin pressures. But retailers said this was not the right time to do so because sales were down due to demonetisation.
While prices of car and truck tyres have been raised by two-three per cent, those for two- and three-wheelers have been raised by two-five per cent. Retailers said the hikes came amid a 30-40 per cent decline in sales due to demonetisation. They also did not agree with the reasons cited by manufacturers for the price hikes.
Some tyre makers did not respond to queries but other companies confirmed the price increases. A few companies increased prices early this week and more are planning to do so before February 11. Ceat said it had hiked prices by one per cent in January. “We are witnessing a significant increase in raw material prices — both natural rubber and crude oil-based. We are evaluating the course of action for the remaining two months of the quarter,” said Arnab Banerjee, executive director, operations, Ceat.
Another industry executive said rubber prices in January 2016 were Rs 97 a kg and this had increased to Rs 137 in January 2017 and now to Rs 160. Compared to last year, prices have climbed 50 per cent. In the last one month, prices rose 17 per cent.
Demonetisation has been felt more in smaller towns where transactions are mainly in cash. The aggressive growth in Chinese tyre sales in the replacement market has slowed down as the business was conducted entirely in cash. Indian tyre makers will have time till the second quarter because Chinese tyres are unlikely come into the market before that.
Industry representatives said prices of Chinese tyres were Rs 5,000-6,000 lower than those made in the country. The price hikes would open the gap and provide an advantage to cheaper Chinese tyres, they added.