Chennai: India’s largest tyre maker by sales value, MRF Ltd, is exploring the possibility of setting up a production facility in China, to counter the threat of low-priced imports from that country.
Imports from China already accounts for one-tenth of the domestic tyre industry.
The Chennai-based company had earlier shelved its plans to set up production facility in China.
However,, it now says that because of ‘inverted’ import duty structure and competition from imports, the company needs to set up an overseas production facility.
In an ‘inverted’ duty structure, tyres (finished product) attract lower duty, whereas raw rubber (raw material) attracts a higher duty levy.
“We will have to go to China because of import threat,” said K.M. Mammen, chairman and managing director of MRF.
Already, company officials are assessing the Chinese market. In order to protect the domestic rubber industry, the import on duty is fixed at 20%, while duty on tyres is between 8% and 10%.
Higher duty on raw rubber, a key component of making tyres, which could go up to 60% of the total cost, means that domestic manufacturers have to depend on domestic supply as imports have become costly.
“If the present duty structure continues, tyre companies could start operations in other parts of the world and then import to India”, Mammen said.
The company has already announced plans to establish a greenfield facility in Tirchy at an investment between Rs600 crore and Rs700 crore, and is also looking at two additional greenfield facilities.
Greenfields are undeveloped land, either currently used for agriculture or left in its natural state.
In addition, the company is spending Rs600 crore towards capacity expansion in all its existing facilities.
MRF officials said the tyre manufacturer is holding talks with the Indian Air Force to set up an exclusive facility to manufacture specialty tyres for the latest fighter jets.