JK Tyre to expand, enter new segments as autos boom

JK Tyre to expand, enter new segments as autos boom

Mumbai: India’s third-largest tyre maker JK Tyre & Industries Ltd is gearing to meet rising demand through aggressive expansion, new forays and smart pricing, a senior official said on Thursday.

The company plans to raise prices by 3-4% latest by the first week of October to offset high raw material prices and protect margins, A S Mehta, marketing director, said on the sidelines of a dealer meet.

Tyre makers like Dunlop India, Falcon Tyres, Apollo Tyres, JK Tyre and Ceat have all raised prices to keep pace with spiralling cost of rubber.

Tyremakers have raised prices by 11-14% in the commercial vehicle radial segment and by 18-20% in the passenger car tyre segment in 2010 so far, Mehta said.

“Margins will remain under pressure in this quarter, not just for us but for the entire industry. Rubber prices have shot off like anything."

Rubber prices have doubled in the past one year, boosting production but still falling short of demand. Mehta expects a shortfall of about 180,000 tonnes of rubber in India in FY 2011.

India is likely to import 110,000 tonnes of natural rubber in 2010-11 as tyre makers source more raw material from abroad.

Car sales in India soared by a third in August to a record high on the back of a booming economy. And auto boom will help JK Tyres grow sales by more than 30% for this fiscal, Mehta said.

The company has earmarked about Rs1,500 crore by the end of FY13 to double its tyre capacity for car and commercial vehicle radials.

By the first quarter of FY14, the passenger car capacity should touch 10 million units and commercial vehicle radials should touch 1.6 million units, Mehta said.

Most of the planned expansion would be at a new plant being set up in Chennai, which is expected to start producing tyres by October or November next year, Mehta said.

JK Tyres is also planning to re-enter the fast-growing two-wheeler market after stopping manufacturing 2-wheeler tyres more than 20 years ago, Mehta said.

Shares in the company ended down about a percent at Rs191.35, in a firm Mumbai market that gained 0.71 on the day.