With auto sector in slow lane, tyre makers begin to feel pinch -Yuthika Bhargava
Industry is pinning hopes on steps by government on scrappage policy for vehicles and GST rate cut to spur tyre demand
While the replacement cycle till now has helped the tyre industry to mitigate the impact of the severe demand slowdown in the automobile sector, the segment — which accounts for about 50% of the tyre market — has started to fill the pinch.
While the sector is somewhat hopeful of an uptick in demand due to the festive season and expectations of pre-buying due to the shift to BS-VI norms, their hopes are largely pinned on measures such as scrappage policy and a reduction in GST rates to spur demand.
“The tyre sector being directly linked to the auto sector has been impacted by the slowdown as well. Although the replacement demand had somewhat cushioned the impact initially, particularly for commercial vehicles, in recent months it is also showing worrisome signs,” Rajiv Budhiraja, director-general at Automotive Tyre Manufacturers Association (ATMA) told The Hindu.
He added that if the current situation continues, tyre demand would soon be in the negative territory across all the key segments.
In a recent report, rating agency ICRA forecast a revenue growth of 3-4% for the tyre industry due to subdued vehicle production, weak consumer sentiment amid slowing economic activity, rising cost of vehicle ownership and softened rural demand. This is in contrast to a growth of 12% in FY18 and 14% in FY2019.
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