To ramp-up tyre supply, dealers ask Govt to remove import curbs

Right after the commercial vehicle (CV) makers announced that a shortage mainly in radial tyres, was leading to a drop in production levels at factories, the CV tyre aftermarket said on Wednesday that it was facing similar constraints in supply.

According to a letter sent by the All India Tyre Dealers' Federation (AITDF) to both the Union Finance and Commerce Ministers, “[the] after sale market has been facing the regulated supply and indiscriminate pricing of tyres and tubes for last 12 months.” The association added that due to the supply constraint and high prices, the dealers' margins have been under severe pressure.

In its letter AITDF, has urged the Government to “lift restriction on radial truck/bus tyre import, not to put up any anti-dumping duty on these radials, to ban export of truck/bus tyres to meet domestic demand and withdraw fiscal stimulus as domestic industry did not pass on the excise cut to the end user.”

It has said that these measures would ensure an adequate supply of radial tyres to both the OEs and the aftermarket.

“Earlier, the 1.3 lakh monthly tyre imports took care of the supply shortfall of domestic companies. But, this has since been stopped by the Government. The domestic industry does not have the quantity or quality to meet the increase in the domestic demand of truck/bus radials. With summer approaching, which is the peak season for demand, the situation may get only worse,” Mr S. P. Singh, Convenor, AITDF told Business Line.

AITDF has further said that most major tyre-makers have reported a healthy profit in the third quarter of the 2009-10 fiscal “due to lower input costs and lower excise outgo and high demand” and thus the tyre industry may not need such protective measures anymore.

“The restrictive and monopolistic trade practices of the tyre majors have been controlling the profit margins of over 11,000 tyre dealers in the country. Their terms and conditions and business model of the trade does not allow a dealer to jack-up its margins on ad-veloram basis in tune with the indiscriminate tyre price revisions indulged into by the domestic tyre majors. Thus, the rate of return on capital for tyre dealers does not go up in a pro-rata manner as is generally assumed by the outside observers. The benefit of opportunistic price revisions, generally, benefits the ‘creamy layer' within the trade,” said AITDF in the letter.

Source: Indiacar.com Source : Business Line (Online Edition) (2/10/2010)