Concern over mounting tyre imports from China

In the last few years Indian tyre manufacturers are making significant investments on commercial vehicle radial tyre manufacturing. But rising imports from China are making Indian manufacturers rethink their investment. According to the Automotive Tyre Manufacturers Association (ATMA), imports from China in the Indian market have gone up by 1,300 per cent over the last five years. In fact, ATMA is asking the 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 are being sold at the retail level at a price almost 30 per cent lower than Indian tyres, says Mr. Rajiv Budhraja, ATMA Director General. Independent importers and grey market operators are under-invoicing imported tyres and selling them at the retail level on cash basis, without paying VAT.

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

Indian manufacturers, particularly JK Tyres and Apollo Tyres, are concerned about the pace of Chinese imports. Though radial penetration in the truck/bus segment is very low at four-five per cent, its adoption is growing rapidly in the after-market. More transporters are switching to radials for higher fuel efficiency, with around 30 per cent reduction in cost.

In response to a questionnaire, Mr. Sunam Sarkar, Chief, Corporate Strategy & Marketing, Apollo Tyres Ltd., says that the situation is quite alarming and immediate steps are required to curb imports.

Question: What is your opinion on the dumping of Chinese truck and bus radial tyres in the Indian market?

Answer: In recent times, Indian tyre companies have made substantial investments in the truck and bus radial (TBR) segment. More such investments are in the pipeline by way of expansion and/or green field projects. However, radial tyres from China continue to be sold in India, rendering investments by Indian companies unviable. At current price realisations, the return on investment in the TBR segment barely covers interest costs. Dumping of Chinese TBRs has a long-term implication for domestic tyre manufacturers – a trend witnessed in other countries as well.

Q: Yow is the overall growth in the truck and bus radial tyre segment and the level of radialisation in the CV segment?

A: Growth of TBRs is slowly but steadily gaining momentum in India, where in the past couple of years the level of radialisation has grown from two per cent to around 12 per cent. However, if you take out Chinese radials which account for 60 per cent of the TBR market, radialisation is only around four per cent.

Q: Does the product quality of Chinese truck radials compare favourably with those manufactured in India?

A: There are 35-40 different Chinese brands available in India, and it is not fair to say that all of them are of less-than-the-desired quality levels. A handful of them have actually improved their product quality in the past few years. But the fact remains that they are not comparable to Indian top brands, nor is there consistency in quality parameters. Our concerns relate to the less-than-desired quality standards that actually compromise on the safety of our commercial vehicle drivers.
Q: What about the current truck and bus radials market size in India, the marketshare of the Chinese brands and the major Chinese truck radial brands sold in India?

A: The Chinese brands currently command around 60 per cent of the truck-bus radial market. Some of the major brands available in the market today are Double Coin, Infinity, Aeolus, Westlake and Super Ranger. The brands keep changing, and new ones are being introduced almost every month.

Q: If unchecked, would this trend affect the prospects of the Indian tyre industry?

A: Continued dumping of Chinese radials has serious monetary, growth, investment and R&D; implications for Indian tyre manufacturers. Given the investments all of us have made, there would soon be enormous unutilised capacities and stockpiling if this trend continues. On the price front, the industry is faced with unfair competition with below par tyres that compromise on safety and service aspects. This has resulted in market distortion and pressure on margins, which in the long run could impact the R&D; work we need to continue with to provide even better radial products to our customers.

Radials are the future of the tyre industry, and the Indian tyre manufacturer ought to be given a fair and even platform to compete and invest in radials. Otherwise we would face an uncertain future.

Q: What are your suggestions to discourage import of Chinese radials?

A: There are a couple of ways of doing it. We believe in fair and open competition but do not think protecting the Indian industry is the right means. However, the Government needs to be alert and alive to unfair competition. Anti-dumping measures is one clear way forward. And we are not alone. There are cases of imposition of anti-dumping duty on Chinese OTR tyres as in the US.

Since most Chinese products are sold avoiding VAT payment, the State Governments lose huge revenues. A mechanism to check this will also help the local tyre manufacturer.

Q: Do Indian tyre manufacturers have enough capacity to cater to the growing demand for truck and bus radials in the domestic market, or is it because of short supply that the Chinese tyres are being sold in the market?