MRTPC hauls up MRF for making false claims

The Monopolies and Restrictive Trade Practices Commission (MRTPC) has started judicial proceedings against tyre manufacturer MRF, for making false claims in its advertising campaigns, regarding improvement in fuel efficiency with the usage of MRF tyres.

In its report, the Director General of Investigation and Registration (DGIR) has recommended that action should be taken against MRF, along with transporters who gave false testimonials and citations saying that they saved money on fuel after using MRF's premium truck tyre, Super Lug 50-FS.

MRF had claimed that its Super Lug 50-FS tyres had low rolling resistance, which leads to an improvement in fuel economy for truck owners. The company had also published, in various national newspapers, testimonials of 35 transporters to support its claims.

Later, some tyre dealers lodged a complaint with the MRTPC regarding MRF’s claims, and the MRTPC referred the matter to DGIR for investigation. During the investigation, DGIR directed MRF to furnish exact performance data, methodology used for testing, sample sizes, load conditions during tests, and other parameters on which the company had based its claim.

DGIR’s investigation has proved that MRF’s claims were false and misleading. It now remains to be seen what action is taken against the company.

Tyre industry growth in India hampered by hike in fuel prices, dumping by Chinese cos

India's tyre production is likely to go up by about 10% this fiscal, which is slightly below the 12-13% growth anticipated by ATMA. Fuel price hikes, high costs of rubber and dumping by Chinese tyre companies have worked against Indian tyre companies, which may have done better in the absence of those negative factors.

It’s expected that Indian tyre companies will continue to remain under pressure in the short-term, due to high rubber prices and cheap imports from China. Also, given the hike in fuel prices in the country, ATMA expects people to postpone the purchase of new vehicles and also a cut down in private vehicle usage – and both these factors will adversely affect the demand for tyres.

According to ATMA data, in the financial year ending 31st March 2008, India's tyre production stood at 81.1 million tyres, ATMA data showed. Two-wheeler tyres make up almost half of the market in terms of number of units produced, while in terms of tonnage, truck and bus tyres dominate the market.

Tyre manufacturers hike prices, more price hikes may be in store for consumers

Even as inputs costs continue to rise, all tyre manufacturers are increasing tyre prices to deal with the issue. Rubber prices, which constitute about 60 percent of the input costs for tyres, rose by 31 percent this year.

Ceat Ltd. will raise prices of non-truck tyres (this includes farm vehicles, car and two-wheeler tyres) by 2-5 percent on the 10th of June. This hike comes just days after the company raised truck tyre prices by 2 percent. MRF and Apollo Tyres have also raised prices recently, while JK Tyre plans to hike prices later this month.

Tyre manufacturers are watching the market and trying to assess how much of a price hike it can take. If the situation warrants – in case rubber prices don’t come down – consumers may have to bear the brunt of yet another hike in the price of tyres later this month, or in July.

ATMA demands for anti-dumping duty to be imposed on Chinese tyres

Tyre imports from China in the Indian market have gone up by 1,300 percent over the last five years, and understandably, the Automotive Tyre Manufacturers Association (ATMA) isn’t very happy about that. In fact, ATMA is asking the Indian government to impose an anti-dumping duty on import of Chinese radial tyres for trucks and buses.

Truck and bus tyre imports from China went up from 88,000 units in 2003-04 to 12.17 lakh units in 2007-08. ‘These tyres, imported mostly from China, are being sold at the retail level at a price almost 30 percent cheaper than Indian tyres,’ says Rajiv Budhraja, Director General, ATMA. He added that independent importers and grey market operators are under invoicing the imported tyres and selling at the retail level on cash basis, without paying VAT.

‘The sale of these unaccounted-for imported tyres is costing the exchequer Rs 60-80 crore per month. The customer is also a loser as these tyres are being sold without any warranty,’ said Budhraja. From an almost insignificant percentage five years ago, imported tyres – mostly from China – have come to account for 14 percent of the 86.47 lakh units replacement truck and bus tyre segment in India.

Apollo Tyres to invest Rs 2,000 crore towards capacity expansion

Over the next three years, Apollo Tyres plans to invest Rs 2,000 crore towards increasing its production capacity in India and abroad. The tyre major, which will soon be setting up a greenfield facility in Hungary, is also setting up a new plant in Chennai, while increasing capacity at its existing facility in Vadodara.

‘We will invest Rs 2,000 crore in next three years, including Rs 1,250 crore for our upcoming plant in Hungary,’ said Satish Sharma, Apollo Tyres chief of India operations.

Apollo Tyres’ plant in Hungary, for which it has already bought 45 hectares of land, would be the company's hub for servicing its car tyre buyers in Europe and North America.

At its manufacturing unit at Vadodara, Apollo plans to increase tyre production from the current 10,000 tyres per day, to 15,000 tyres per day, by mid-2009. The company will also increase its commercial vehicle radial tyre capacity at Vadodara from 300 to 1,100 tyres per day, by next year. The same plant will also make off-road tyres, for which Apollo recently entered into an agreement with BEML and Coal India.

Finally, part of Apollo Tyres Rs 2,000 crore investment will go towards setting up a new plant in Chennai, which would have a production capacity of 20,000 tyres a day. This plant is likely to be operational by July/August 2009.

In a bid to support its commercial vehicle tyre customers, Apollo is also setting up a chain of wheel balancing and aligning centres, called ‘Trust.’ With the increasing adoption of radial tyres in the CV segment, proper wheel balancing and alignment is a must for tyres to deliver their best performance, and the move to set up ‘Trust’ centres is a step towards ensuring that that aspect is not ignored.

Going green: Kumho introduces eco-friendly tyre!

It’s not just cars – even tyres must be eco-friendly in the new age of motoring. And Korean tyre company, Kumho, is already there – the company recently displayed its new eco-friendly tyre, the Solus KH19, at the REIFEN 2008, in Essen, Germany.

‘This is a milestone year for Kumho as we strengthen our focus on making ‘greener’ products,’ said Sae-chul Oh, CEO and President of Kumho Tires. ‘These new tyres improve fuel efficiency, lower CO2 emissions and run more quietly. We have also re-engineered our manufacturing process to make it more environmentally friendly. Kumho has taken this leading role in environmental issues because it allows us to provide tangible benefits to our customers, while simultaneously helping the planet,’ he added.

The Solus KH19 tyre is Kumho’s flagship eco-friendly product and is based on proprietary technologies including KADAS (tyre structure simulation technology), ESCOT (tyre contour optimisation technology) and TTIA (tyre-terrain interaction analysis). The tyre boasts a 35 percent improvement in rolling resistance and a six percent decrease in CO2 emissions. It is also made of more eco-friendly materials, including low PAHs (polycyclic aromatic hydrocarbons) oils and non-petroleum fillers.

Chinese tyres being dumped in India despite duty

With up to 30% price advantage, Chinese-made tyres are taking over the commercial vehicles replacement tyre market in India

The import of commercial vehicles tyres in India has gone up in the last five years, and today, Chinese tyres constitute more than 90 percent of all tyres brought into the country. Anti-dumping rules, regarding the import of commercial vehicle tyres in India, were passed in July last year, but that seems to have made little difference as Indian tyres continue to be up to 30 percent more expensive than their Chinese competition.

According to ATMA, most of the competition between Indian and Chinese tyres is in the replacement market, where Chinese tyres have been successful at taking on Indian companies like Apollo, JK and MRF. The Indian commercial vehicles replacement tyre market is very price sensitive, and with their cost advantage, Chinese tyres are able to do very well here.

According to ATMA estimates, the share of Chinese tyres in the replacement market in India has risen from a mere 0.3 percent in 2002-03 to 14 percent as on 31st March 2008. Since the anti-dumping ruling was on bias-ply truck and bus tyres, Chinese companies have been clever enough to shift their focus to radial tyres, which are now being brought to India at prices much cheaper than Indian-made radials for commercial vehicles.

Last year’s ruling increased anti-dumping duty from US$75 to US$135, but even that has not been enough to stem the tide. It’s now being suggested that the duty be increased to US$170 to help the domestic tyre industry.

ATMA seeks rubber cess waiver or reduction

In counter rising prices of natural rubber, the Automotive Tyre Manufacturers Association (ATMA) has requested that the government should waive or reduce cess on rubber, which would help ease the financial burden on tyre companies in India.

ATMA also suggested that the government should allow manufacturers to take full CENVAT on the total cess amount paid, against R&D expenses. ‘In view of the high prices of natural rubber during the last few years, charging of cess only adds to the input costs for the tyre sector,’ said Raghupati Singhania, who heads JK Tyre and who’s also the chairperson at ATMA.

Rubber prices have risen by 33.64 percent over the last one year. Current prices stand at Rs 120 per kilo, against Rs 89.79 per kilo a year ago. Plus, a cess of Rs 1.50 per kilo is also paid by tyre manufacturing companies. No wonder then that according to ATMA, rubber accounts for up to 42 percent of raw material cost of the tyre industry.

‘At such high prices, there is no justification for natural rubber growing interests to be supported by any cess. An increase of Rs 1 per kg on rubber adds to an incremental burden of Rs 49 crore on the tyre sector, taking into account the natural rubber consumption of 4.91 lakh tons by the sector,’ said Singhania.

According to Rubber Board data, of India’s total rubber consumption of 8.6 lakh tons in 2007-08, the tyre sector accounted for about 4.9 lakh tons.

MRF to invest Rs 90 crore on new plant in Tamil Nadu

With the new manufacturing facility, MRF will have a total of three plants in Tamil Nadu

Tyremaker MRF Ltd has announced that it has signed an agreement with the Tamil Nadu state government to set up a radial tyre facility in Perambulur, and for the expansion of two of its existing plants in the state. MRF has two other factories in Tamil Nadu, at Tiruvattiyur and Arakonam.

The company said it planned to invest Rs 90 crore towards setting up the new facility, and is acquiring nearly 290 acres of land for the plant. The Perambulur facility is expected to have a total capacity of 700,000 radial tyres.

Tyre prices likely to go up again in two months

Prepare to pay more for the black stuff...

In the face of ever-increasing input costs, tyre manufacturers in India may have to hike prices again in about two months, to offset the recent spike in rubber prices. Earlier this month, Ceat and JK Tyre had raised their tyre prices by five percent, while MRF had increased prices by two percent.

According to rubber board data, rubber prices – which account for up to 60 percent of the cost of tyres – have gone up by more than 22 percent in 2008. High crude oil prices have pushed up prices for synthetic rubber, while natural rubber prices have gone up due to tight supply. In fact, prices for natural rubber may go up from the current Rs 117/kg to Rs 125/kg with the next few months, so no relief is in the offing for tyre manufacturers.

Ceat to set up two new plants

Ceat Ltd plans to invest Rs nine billion towards setting up two new plants in India. Paras Chowdhary, MD, Ceat, said the company plans to raise this money through debt, sale of land and internal accruals. Ceat also expects revenue to grow 20 percent on year, to Rs 26 billion.

J.D. Power Asia Pacific report: MRF ranks highest in India CSI

MRF comes out on top yet again, for the third consecutive year

MRF ranks highest, among five tyre manufacturers, in customer satisfaction with original equipment tyres, according to the J.D Power and Associates 2008 India Original Equipment Tyre Customer Satisfaction Index (CSI) Study released yesterday.

Now in its eighth year, the study analyzes new-vehicle buyer satisfaction with their original equipment tyres by examining five key factors. In order of importance, they are: appearance, durability, traction, ride quality and handling. With an overall CSI score of 836 on a 1,000-point scale, MRF ranks highest for a third consecutive year and performs particularly well in all factors driving overall satisfaction. Apollo follows MRF in the rankings with 816 points.

The study finds that there is a strong link between the ownership experience and repurchase intent. Among customers who report they are highly satisfied with their tyres, nearly 80 percent say they ‘definitely would’ repurchase their original brand. However, repurchase intent drops by nearly 40 percent among customers who are highly dissatisfied with their original tyre brand. In addition, among customers who say they ‘definitely would not’ or ‘probably would not’ repurchase their original brand, tyre noise is the most commonly cited reason for not repurchasing.

‘Consumers may not have much choice in which tyres come standard with their new vehicle, but they definitely have a choice when it comes time to replace those tyres,’ said Mohit Arora, senior director at J.D Power and Associates, Singapore. ‘Having a satisfying tyre ownership experience will certainly strengthen a customer’s decision to purchase the same brand that came on their vehicle. Hence, it is vital for manufacturers to increase product quality to achieve high levels of customer satisfaction in order to foster higher loyalty and advocacy levels.’
The study includes these key findings:

1. Nearly one in five new-vehicle owners reports having a problem with their tyres. Among owners experiencing a problem, the most frequently cited is puncture damage, which is reported by more than 65 percent of owners.

2. When purchasing new tyres, tyre brand name is the most important consideration among owners, followed by self-sealing tyres.

3. At the factor level, owners report the highest levels of satisfaction with tyre appearance and ride quality at highway speeds.

‘While puncture damage is typically beyond the control of manufacturers, and considering that self-sealing tyres have the second strongest impact on vehicle purchase, having this feature on their tyres may prove advantageous for manufacturers,’ said Arora.

The 2008 Original Equipment Tyre Customer Satisfaction Index Study is based on responses from 3,381 new vehicle owners surveyed between 12 and 18 months of ownership.

JK Tyre & Industries Ltd. acquires Mexico-based Tornel

JK Tyre & Industries Ltd. has acquired the Mexico-based tyre company, Tornel, for Rs 2,700 million. With this acquisition, JK Tyre turnover exceeds US$ 1.0 billion mark and the company gets free access to NAFTA and other trade blocks. The deal is proposed to be financed through a combination of internal accruals and debt.

The acquisition is for 100% shareholding in the company and is being made through the Special Purpose Vehicle (SPV) route. The transaction will involve an amount of approximately Rs 2,700 million and the buyout is expected to close by the end of May 2008, subject to applicable regulatory approvals. With this acquisition, JK Tyre & Industries Ltd. would substantially increase its global foot print.

Tornel has three operating tyre plants with an aggregate capacity of 6.6 million tyres per annum. Situated in Azcapotzalco, Tultitlan and Hidalgo, the three plants of Tornel employ 2,000 people. The company is present in the entire range of bias-ply and radial tyres for trucks, LCVs, and passenger cars.

Commenting on the acquisition, Hari Shankar Singhania, Chairman, JK Tyre & Industries Ltd., said, ‘JK Tyre has been outsourcing tyres for its export markets from China and Vietnam, besides its four manufacturing facilities in India. In line with our vision, this acquisition extends our global reach. The acquisition is also a strategic fit for JK Tyre as we are already the largest exporter to the North and South American markets.’

Dr R P Singhania, Vice Chairman & Managing Director, said ‘We are glad that JK Tyre & Industries Ltd. continues to sustain its pace of growth and march towards establishing itself as the no.1 tyre brand in India. JK Tyre already exports its tyres to 75 countries across six continents. Our export turnover last year was Rs 500 crore. This acquisition will add substantial value to our existing tyre operations and strengthen our brand positioning. Expansion in the existing as well as our imminent forays into newer markets will drive our growth.’

The turnover of Tornel is USD 202 million which together with JK Tyre's turnover of Rs 30.2 billion (i.e US$ 800 million) will make JK Tyre a leading Indian tyre company, with combined turnover exceeding US$ 1.0 billion. With this acquisition, JK Tyre would be ranked 14th globally.