CHENNAI: Indian tiremakers, suffering through a slowdown in car and commercial-vehicle sales, are sticking to plans to add capacities on the expectation that sales will revive later this year following national elections.
“The entire election process of formation and settling down of the government is going to play out in first half" of the financial year that began in April, said Rajiv Budhraja, director general at India’s Automotive Tyre Manufacturers’ Association. “The second half would see a quick pick up that we hope would be the mirror image of the dampening factor of the first half, because the government will be in place and the investment cycle starts again."
National elections from April to May, culminating in a second term for Prime Minister Narendra Modi, may have sapped some demand though the slowdown hasn’t been limited to that period. The sale of cars and SUVs started to fall in November, before posting their worst decline since 2011 in April. Truck sales too have been sluggish since November.
Undeterred by the prospect of the slowdown extending, Apollo Tyres Ltd., India’s largest tiremaker by revenue, is investing 18 billion rupees ($259 million) to set up a new factory in the southern state of Andhra Pradesh to make truck, bus and passenger car tires, said Satish Sharma, president, Asia Pacific, Middle East and Africa.
The Indian unit of Japanese tire maker Bridgestone Corp., which has factories in the Indian states of Madhya Pradesh and Maharashtra, is pushing ahead with its proposed capital expenditure as is domestic tiremaker Ceat Ltd.
“We are going ahead with all the capex as planned," Ceat’s Chief Financial Officer Kumar Subbiah said at a post earning’s call with analysts on Jan. 29. Ceat, the fourth-largest tiremaker in the country, didn’t respond separately to an interview request.
The prospects of a growing economy help, said Parag Satpute, managing director at Bridgestone India.
“GDP growth automatically translates into automotive ownership and tire sales," he said in an interview. “The automotive ownership today is so low, it can only go up."
Toward the end of this calendar year, another factor may drive sales. India plans to introduce new norms by 2020 to bring vehicular emissions in line with Euro 6 standards. That is expected to make cars more expensive, especially diesel ones, and therefore buyers may rush to purchase new vehicles before they become more expensive.
Questions sent to domestic tiremakers MRF Ltd., the second largest, and JK Tyre & Industries Ltd., the third largest, went unanswered, while Continental AG’s tire division in India declined to comment.
“The mid-to-long-term risk is very, very good for a market like India," Bridgestone’s Satpute said.