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Sector Focus : Tyre

Tyres: State of the industry (2000-01)

Tyres: Tariffs, prices and landed costs

	Tariffs (per cent)				Prices (Jan 2001)				Landed costs (Rs/tonne)
	Customs		Excise		Dom- estic		Intnl		Pre- budget	Post budget
	00-01	01-02	00-01	01-02	(Rs/ton)		($/ton)
New tyres
Truck and bus	44.0	40.4	32.0	32.0	8,964	1	-		-	-
Light truck	44.0	40.4	32.0	32.0	2,689	1	-		-	-
Car cross ply	44.0	40.4	32.0	32.0	936	1	-		-	-
Car radials	44.0	40.4	32.0	32.0	1,149	1	-		-	-
Tractor rear	44.0	40.4	16.0	16.0	5,756	1	-		-	-
Motorcycle	44.0	40.4	16.0	16.0	428	1	-		-	-
Used/retreaded tyres
Truck and bus	44.0	40.4	32.0	32.0	-		-		-	-
Car cross ply/radials	44.0	40.4	32.0	32.0	-		-		-	-
Natural rubber	30.0	30.0	-	-	28,800	2	654	3	40,748	40,748
SBR	44.0	40.4	16.0	16.0	54,000		950		65,084	63,439
PBR (1220)	44.0	40.4	16.0	16.0	63,220		900		61,658	60,100
NTC fabric	25.0	25.0	16.0	16.0	179,000		2,900		176,114	176,114
Carbon black (N220)	44.0	40.4	16.0	16.0	33,300		500		33,569	32,721

NTC: Nylon tyre cord; PBR: Polybutadiene rubber; SBR: Styrene butadiene rubber
1 Market prices, in terms of Rs/tyre
2 Market prices
3 Fob prices
Notes
1) Excise duty on natural rubber is in the form of cess of Rs 1.5/kg.
2) For NTC fabric, an additional excise duty of Rs 10/kg is chargeable in the basic customs and excise duties.
Source: CRIS INFACŪ

• Total capacity of the tyre industry is expected to increase by 11.2 per cent, to around 53.3 million tyres, due to capacity additions in the car radial tyre category.
• Growth in tyre production is estimated at 4.3 per cent, due to lower than anticipated growth in the replacement demand for truck and bus tyres, and a decline in automobile production.
• Average price realisations on truck tyres are expected to remain stable. However, average prices of car radials are expected to decline by 5-7 per cent, as compared with those in 1999-2000. Prices are expected to decline due to an increase in the supply of car radials, as a result of significant capacity additions by tyre producers.
• Operating profit margins of tyre producers are expected to decline, due to higher prices of raw materials. (In 2000-01, average domestic prices of NTC fabric would be higher by 4-5 per cent; carbon black prices, by 5-7 per cent; PBR prices, by around 20-22 per cent as compared with those in 1999-2000. In 2000-01, domestic prices of raw materials increased, due to an increase in international prices.)

Tyres: Budget impact

Impact factors

Company name	Impact	Impact factors
Apollo Tyres	Pos	A, B, C, D
(74.00, 74.60)
Ceat Ltd.	Pos	A, B, C, D
(27.70, 27.50)
Goodyear India	Pos	A, B, C, D
(41.80, 41.30)
JK Industries	Pos	A, B, C, D
(25.20, 25.95)
MRF Ltd.	Pos	A, B, C, D
(901.00, 937.00)

Note

Figures in brackets indicate the closing share prices, on February 27, 2001 and February 28, 2001, respectively.

pos= positive neg= negative neut= neutral

Source: CRIS INFACŪ

A: The reduction in the customs duty on caprolactam (the main raw material for NTC fabric), from 27.5 per cent to 20 per cent is expected to be passed on to the tyre producers. This is likely to benefit the tyre producers, as NTC fabric accounts for 34 per cent of the raw material cost of tyre production.

B: The decrease in the effective customs duty on SBR and PBR is expected to have a positive impact on tyre producers. The consumption of SBR and PBR is higher in non-truck tyres as compared with truck tyres. As a result, companies such as Ceat Ltd., Goodyear India and MRF Ltd. (around 50 per cent of whose product mix consists of non-truck tyres) are expected to benefit more than companies, such as Apollo Tyres and JK Industries (as truck tyres constitute more than 80 per cent of their product mix).

C: The decrease in the effective customs duty on carbon black is expected to have a positive impact on tyre producers.

D: The reduction of surcharge on corporate tax, from 13 per cent to 2 per cent and the expected decline in interest rates, is expected to have a positive impact on producers.

Rediff-CRISIL Budget Impact Analysis
Budget 2001

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

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