Tyre manufacturing consumes 71% of the total natural rubber produced in India

By Abhyjith K.A | November 17, 2023

Auto and tyre makers’ profits will fall in the upcoming quarters as rubber prices are projected to rise, according to industry experts.

Rubber prices rose 19% to Rs.165 per kg from June to November this year, according to data compiled by Bloomberg. The price is projected to increase further, according to industry experts.

“Rubber growers currently aren’t getting remunerative prices,” said Dr. Sawar Dhanania, chairman of the Rubber Board of India. Input costs such as those for labour are increasing, so rubber prices will increase further, he said.

Net profits of Maruti Suzuki, India’s largest automaker in terms of market share, rose by 80% and MRF, India’s largest tyre manufacturer in terms of market share, saw a near five-fold increase in net profits for the second quarter of 2023, compared to the same quarter of the previous year.

Net profits for auto and tyre companies have historically been inversely proportional to rubber prices, according to Bloomberg data.

“There will be an increase in rubber prices and crude oil costs, so some margin pressure will come next quarter,” said Mayur Milak, Senior Vice President of Auto & Aviation at Asian Markets Securities Pvt Ltd.

The tyre manufacturing industry uses 71% of the total natural rubber produced in India, according to data from the Association of Natural Rubber Producing Countries (ANRPC).

India has a total of 28 tyre companies with an industry turnover of Rs 75,000 crore in the financial year 2021-22 according to the Automotive Tyre Manufacturers’ Association (ATMA)

Tyre companies will have to raise prices to maintain their profitability, said a J.P. Morgan India official, who did not wish to be named.

Emails to Maruti Suzuki, along with six other Indian automotive companies and seven of India’s largest tyre makers in terms of market capitalization, including MRF, remained unanswered.