Tyre Cos Could Post Bet­ter Num­bers Ahead: An­a­lysts

Man­u­fac­tur­ers ex­pect govt to im­pose anti-dump­ing duty of 7-12% on Chi­nese im­ports

The Economic Times - - Smart -

ET In­tel­li­gence Group: The pro­jected next-fis­cal earn­ings for JK Tyre, Apollo Tyres, MRF, and Ceat could see an up­grade be­tween 5% and 15% if In­dia im­poses anti-dump­ing du­ties on truck and bus ra­dial tyres (TBR).

The Di­rec­torate Gen­eral of An­tidump­ing and Al­lied Du­ties (DGAD), the watch­dog over­see­ing un­fair trade prac­tices, has rec­om­mended im­pos­ing 7-12% anti-dump­ing du­ties on TBR used in the com­mer­cial trans­porta­tion sec­tor. The Min­istry of Fi­nance is yet to de­cide on the rec­om­men­da­tions of DGAD. The lead­ers in the TBR space—JK Tyres and Apollo tyres—to­gether con­trol about 60% of the mar­ket. They would be pri­mary ben­e­fi­cia­ries of the anti-dump­ing duty on Chi­nese TBR tyres. In its in­ves­ti­ga­tions, the DGAD found that dump­ing mar­gins for Chi­nese firms has been up to 40%, as the landed price of Chi­nese im­ports were below the sell­ing price and cost of sales for the do­mes­tic in­dus­try. At the same time, China’s share of im- ported tyres reached 91% in FY17 com­pared with 40% three years ago. The shares of Spain, Ja­pan, and Thai­land fell. As a re­sult, the prices of Chi­nese TBR tyres were 20-25% lower than do­mes­tic tyre prices. Lower prices helped the Chi­nese TBR tyres to cap­ture a size­able share in the do­mes­tic re­place­ment mar­ket. In the past three years, the vol­umes of Chi­nese TBR tyres grew three fold, and their mar­ket share reached 30-35% in the re­place­ment mar­ket. Hence, the DGAD rec­om­mended anti-dump­ing duty of 7-12% on TBR, which trans­lates into ₹ 1,000-1,800 per tyre. The im­po­si­tion of the levy is di­rec­tion­ally pos­i­tive for In­dian tyre mak­ers. Ac­cord­ing to a JM Fi­nan­cial note, if im­ports of Chi­nese tyres fell 50%, they would trans­late into 1-3% incremen­tal vol­ume for Apollo, Ceat and JK Tyre for the next fis­cal. Also, the ab­sence of Chi­nese sup­plies would en­hance the pric­ing power of lo­cal man­u­fac­tur­ers. Last FY, about 16 mil­lion truck tyres were sold in In­dia and the TBR seg­ment has ex­panded at 5-7% an­nu­ally in the past few years.

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