JK Tyre to capitalise on duty hike on Chinese products, beef up exports

Singhania-promoted JK Tyre is ramping up exports as demand has dried up in the domestic market due to a slowdown in auto sales, which have been declined nine months on the trot.


The company has spotted an opportunity in the US-China trade spat in which the Trump administration has imposed higher tariffs on Chinese goods making their way to America.


“The trade war between US and China, which has led to anti-dumping tariffs being levied, provides us a significant opportunity to boost our exports. We have been there in those markets for a long time, now we're ramping up,” Rajiv Prasad, President, JK Tyre India told Business Standard in an interview.


Last week, US President Donald Trump announced a 10 per cent additional tariff starting September 1, on virtually every Chinese import. JK Tyre's exports have grown more than 50 per cent.


Stating that his company has an export opportunity in every market in which Chinese products are prevalent, Prasad said his firm is particularly eyeing US and European markets, where its exports had dwindled earlier.


“We were very slow in the American markets. The anti-dumping duty (on China) will stay for at least five years and by that time I am sure the domestic market will come back,” Prasad said. The company currently exports to 105 countries.


Experts watching the tyre market, however, said it would not be easy to boost exports due to weak demand in overseas markets. “Even companies exporting tyres are facing turbulence due to weak demand in Europe. Passing on any cost hike would be tough. Further, a production cut announced by a few OEMs would also lower tyre sales in the first quarter of FY20," said Mitul Shah, Research Analyst, Reliance Securities.


However, the slowdown has forced JK Tyre to delay capital expenditure plans and cut down on production. A Rs 650 crore investment plan to ramp up production of radial tyre has been deferred.


“We have delayed the capex. Since we are a little heavy on debt, we want to conserve cash. In terms of operations, we are cutting down on costs-whether it is for logistics, inventory etc,” Prasad said, adding that the production cut was necessitated due to late in demand uptick from auto companies.


“We have cut down on some part of production but that is only to ensure that we don’t sit on piled up inventory. Stock levels are a bit high. We were expecting the OEMs to pick up in July. But we have been able to reduce our inventories due to ramped up exports,” he said.


Prasad however believes there will be a turnaround in consumer demand by year end.


“A little push from the government towards improving sentiments will put things back in shape. I personally believe it’s a growing economy and a seven per cent growth will happen, irrespective of anything,” he said.