Crippling Auto Sector Bring Down Tyre Volume In H1 FY20; Exports On Rise

For the month of April-September, 2019 total tyre production was 912.67 lakh units as against 964.26 lakh units last year

A prolonged and crippling auto sector slowdown in India coupled with rampant production cuts by automakers is affecting the health of the domestic tyre industry. The country’s overall vehicles production slipped down sharply by 13.2 per cent while total tyre production also remained southbound witnessing a decline of 5.3 per cent in the first half of FY 20 over the same period a year ago.

For the month of April-September, 2019 total tyre production was 912.67 lakh units as against 964.26 lakh units last year, as highlighted by the industry body Automotive Tyre Manufacturers’ Association (ATMA).

Passenger car tyre segment dropped to 204.12 lakh units, down by 9 per cent while the production of motorcycle tyre slipped by 4 per cent to 346.22 lakh unit. Production of truck and bus tyre also plunged 9 per cent to 95.29 lakh unit during the period under review.

Slower than expected demand from the fleet operator severely affected the replacement sector, which is one of the major revenue contributors for the tyre industry besides OEMs."Especially in case of passenger car and motorcycle tyres, OEM supplies represent a significant chunk (nearly 50 per cent) of overall tyre sales. So any slowdown in auto demand reflects on the tyre production too. Even replacement sales of tyres are under pressure in view of economic slowdown and depressed sentiment," said Rajiv Budhraja, Director General, ATMA.

“When the OEM market turns weak, the impact comes in the form of lower utilisation of capacity and the fixed cost gets distributed over a smaller revenue,” Kumar Subbiah, Chief Financial Officer at Ceat Tyres said.

The only bright side in the domestic tyre industry is that the exports reported 13 per cent jump in April-September 2019. Except for the niche segments like off-road tyres, implements, tractor tyres and industrial tyres, almost every segment has shown growth in export. Moving to the figures, the medium and heavy commercial vehicles tyre exports were up 17 per cent, passenger vehicle up 8 per cent, motorcycles up 30 per cent, three-wheelers up 16 per cent and scooters up by 20 per cent.

Source: Economic Times