October 16, 2006	Monday	Ramazan 22, 1427

RATTLED by the growing imports of tyres for buses and trucks from China, Indian tyre-makers last week succeeded in convincing the federal government to impose a provisional anti-dumping duty (ADD) on Chinese and Thai tyres.

But many tyre dealers are opposed to the move and plan to challenge the decision of the government. The ADD, which became effective last week, will continue for six months, and if the government is convinced about its validity, it could be extended for another five years.

The Automotive Tyre Manufacturers’ Association (ATMA), which represents the Indian tyre producers, complained to the government about the low prices of imported commercial vehicle tyres from China and Thailand.

The association represents the interests of tyre makers, including leading firms like Apollo Tyres, Ceat, JK Tyres, Birla Tyres and MRF, which together account for over 70 per cent of the market share.

Following complaints from tyre manufacturers, the government initiated a probe into imports of non-radial bias tyres from China and Thailand over a 14-month period, and found some substance in the allegations. According to D. Ravindran, director-general, ATMA, Chinese firms were dumping cheap, low-quality tyres at ridiculously low prices in the Indian market, hurting domestic producers.

While domestic production has been growing by around 10 per cent annually, imports have been rising much faster, doubling in recent years. The main reason, of course, is the price difference. A pair of Chinese bus/truck tyres cost around Rs17,000, whereas the locally-made one costs around Rs24,000.

The ATMA asked the government to consider China as a ‘non-market economy’ and to compare tyre prices with those prevailing in Sri Lanka. Accordingly, the government worked out on the basis of tyre prices in the neighbouring nation, and decided to slap anti-dumping duties on tyres bought from China and Thailand.

The reference price for imported tyres has now been more than doubled and the imposition of ADD will raise their price by another eight per cent (about Rs1,000). But despite its imposition, Chinese bus and truck tyres will continue to be cheaper than the domestic ones.

Some tyre makers – like Apollo Tyres – have already complained that the ADD is too low, and have called for a further hike.

But the move has been vehemently opposed by the All India Tyre Dealers’ Federation, which – together with some Chinese exporters – plans to file objections later this week. According to S.P. Singh, convenor of the federation, the government should withdraw the ADD and allow market forces to operate.

Tyre dealers accuse manufacturers of jacking up the prices by nearly Rs5,000 this year, even though natural rubber prices have fallen: from a high of Rs115 a kg, they have tumbled to around Rs80 at present. Dealers fear that if imports of 10,000-odd Chinese tyres that are bought into the country every month slow down because of the ADD, domestic producers would further jack up their prices.

But the ADD is unlikely to drastically impact imports from China and Thailand, as the price differential between imported and Indian tyres is still substantial. Tyre dealers are also trying to exploit a rift between manufacturers. Some, like MRF – a leading manufacturer – have refused to raise the price, and dealers are now pushing tyres of the company, besides Chinese ones.

THE domestic industry produces about 65 million tyres (including 10 million in the commercial vehicle segment) annually, valued at about $3.2 billion. Replacements account for half of sales.

A little under a million tyres are imported every year, about 300,000 of which are bus and truck tyres. India has been slow in converting from non-radial bias tyres to radial ones in the commercial vehicle segment.

According to industry figures, radialisation levels are barely two per cent for the heavy vehicles segment, as against 10 per cent for light commercial vehicles, and 85 per cent for passenger cars.

With the Indian automobile industry growing rapidly consumers also have a variety of options. In the past, the choice was limited and they had to go in for one of the two brands – Premier Padmini, or the Ambassador.

According to the Society of Indian Automobile Manufacturers, the industry grew by 16.5 per cent during the first five months of the current fiscal. Last year, 1.14 million passenger cars were sold in India; by 2010, two million cars are expected to be sold, and by 2020, five million.

Today, there are dozens of international brands, and most consumers prefer modern vehicles with radials, or even tubeless radial tyres. The market for radial tyres in India is growing by about 30 per cent annually.

Tyre makers are, therefore, investing in new plants to cater to the demand for radials. Ceat, for instance, is ploughing in about Rs5 billion in a new plant that will churn out 50,000 radial tyres every month for trucks. The company manufactures about 40,000 car radial tyres a month (this is expected to be expanded to 250,000 in about five years), and imports truck radial tyres from Italy.

Other tyre makers also plan to invest in new technologies to cater to the change over from non-radial nylon bias tyres to radial ones, both in the automobile and commercial vehicle segments. Foreign firms are also looking at the burgeoning demand for tyres in India and plan to invest in the country.

The Yokohama Rubber Co of Japan, for instance, is establishing a wholly owned subsidiary in India next year. Initially, it will import tyres and sell them in India, but the company could end up setting a manufacturing unit as well at a later stage.