Despite a revival in offtake in the domestic market, the margin-boosting export segment continues to hurt tyre companies, as the latter recorded a fall of 25 per cent in the first two months of this financial year.
According to the latest figures from the industry body, the Automotive Tyre Manufacturers Association (Atma), total exports dropped by 25 per cent to 736,070 units during April-May, compared with 985,273 units reported in the corresponding month last year.
Exports of key categories like the truck and bus segment fell by 10 per cent to 282,247 units as against 314,938 units.
This category is the largest amongst all the export market segments and is considered the cash cow for manufacturers, due to superior margins.
Exports of tyres for passenger cars during the same period of dipped by 19 per cent to 125,542 units, as against 155,934 units recorded in the same period a year earlier.
Similarly, exports of light commercial vehicle tyres witnessed a slump of as much as 35 per cent. The segment saw exports of just 201,478 tyres as compared to 309,450 tyres during the two reporting periods.
Rajiv Budhraja, Director-General, Atma, said: “The impact of continuous fall in export volumes is significant, as exports have traditionally accounted for approximately 15 per cent of the total turnover of the tyre industry.”
“India’s export markets are yet to fully recover from the downturn in the last one year. More important, India’s competitors in export markets, particularly China, are aggressively tapping export markets, aided by export incentives provided by these countries,” added Budhraja.
The decline in export numbers from India is reflected in the export free-on-board (FOB) value.
The average monthly export FOB value, which stood at $42.96 million in 2007-08, fell 4.9 per cent in 2008-09 to $40.88 and has seen a sharp decline of 21.2 per cent to $32.20 this year.
“During last year, the total FOB value was cushioned by strengthening of the dollar against the rupee; otherwise the impact of fall in exports on FOB value would have been severer,” added Budhraja.
To indicate, the rupee fell from an average of Rs 40.23 a dollar in 2007-08 to Rs 46.47 a dollar during 2008-09, a depreciation of 14 per cent.
In addition, cheaper tyres from China and Korea have flooded the domestic market, with their imports jumping by 47 per cent to nearly 2.4 million tyres in the 10 month period of April-January last year, from 1.62 million recorded in same period of the previous year.
Experts say the surge in imports of cheap tyres is due to the lack of government effort to address the dumping concerns on such tyres.
Source : Business Standard