Mumbai: Tyremakers Dunlop India and Falcon are looking to raise product prices for the second time in a month as rubber prices soar, threatening margins, a senior company official said on Wednesday.
“We raised prices in the begining of June between 2-4% in different tyre categories. We are thinking once again of raising prices,” Pawan Kumar Ruia, chairman of Ruia Group, which owns both companies, told Reuters in an interview.
Spot prices of rubber, which accounts for over half the total cost of a tyre, rose to a record high of Rs18,000 on Monday.
“Certainly the way the rubber prices are going higher and higher, the entire thing can’t be passed on to the consumer. So that will certainly have an effect on the bottomline,” Ruia said over the telephone from Kolkata.
Ruia said his firms will also be looking to enhance output given the boom in India’s auto sector, which has resulted in many parts suppliers not being able to cope with the increasing demand from original equipment manufacturers (OEM).
India’s No 2 truck and bus maker Ashok Leyland has said supply constraints in terms of steel products and tyres have been posing challenges to its production.
Ruia said Dunlop’s daily capacity would more than double to 140-150 tonnes from the current 60 tonnes. The group will also add 500,000 units to Falcon’s current monthly production of 1.3 million units by March, he said.
“Auto sector is certainly in buoyancy right now and that is certainly good for the tyre industry. The issue right now is the pricing. If you take OEM prices and replacement prices there is a huge difference between the two pricing,” Ruia said.
Dunlop currently supplies all its tyres for the replacement market. However, the firm is talking to many OEMs and will begin supplying to them shortly, he said.
Shares in Dunlop ended 5% higher at Rs70.80 , while Falcon, which pared losses and turned positive after the announcement of a proposed hike, finished 1.89% higher at Rs169.75 .
Ruia also said almost every tyre maker in India is expanding capacity to meet ballooning demand from the auto industry, but domestic rubber production is not rising at the same pace.
The country’s rubber imports in 2010-11 will go up due to higher domestic demand and government may halve import tax to 10% to calm domestic prices, he said.
The Ruia Group, which is conducting a due diligence on troubled Korean SUV maker Ssangyong Moto, expects the diligence to get over in the next 7-10 days, Ruia said.
“We will then decide whether we will bid for Ssangyong,” Ruia said.
Besides Ruia Group, India’s top utility vehicle maker Mahindra and Mahindra, France’s Renault SA with Japan’s Nissan are in the race for Ssangyong.
The Ruia group is also looking for acquisitions, especially in the automotive segment, both at home and overseas, he said.
“We are looking at acquisitions certainly. There are several proposals at our table which we are analysing,” he said.