Cheer amidst a tinge of despondency
Last few days have brought some good cheer and some cause for despondency for the tyre industry in India. Good news first. After three years of low single digit growth and even degrowth, the newly released production data for the Financial Year FY 2015 shows that tyre production in India went up by more than 13 per cent in FY 2015 YoY. Last three years saw a growth of 5 per cent, (-)3 per cent and 5 per cent respectively in production.
Yet again, it was amply proved that tyre industry mirrors the performance of vehicle industry and overall economic scenario. The years when tyre production went down also have been tough years for automobiles and the economy at large. After modest growth for two consecutive years, last financial year saw Indian economy growing at 7.3 per cent in India and vehicles, particularly Medium & Heavy Commercial Vehicles and Passenger Vehicles, two mainstays of automobile industry, raced back to the positive territory.
However the new hope for better days ahead has come with a tinge of gloom. Tyre imports have been surging in the last few years and FY 15 saw no let up in import momentum. In fact, imports of Truck & Bus Radials went up by a staggering 60 per cent in FY 15 against the previous year. In case of Passenger Radials, imports went up by 11 per cent and fell just short of a figure of 5 million units. Imported tyres have come to account for substantial chunk of replacement (aftermarket) sales. In Truck & Bus Radials, for instance, imports account for 20 per cent of sales in replacement market.
Import of tyres, in itself, is not to be abhorred. We live in an economically integrated word and trade and commerce is par for the course. However, problem arises when tyres are imported indiscriminately while India is self sufficient in production of all kinds of tyres with proven expertise and quality or when tyres are imported cheap using unfair means such as dumping and the markets are swarmed denying the domestically manufactured tyres their rightful place. In many cases, tyres are being imported at prices even lower than the raw material cost.
Tyres are being imported in the country at prices cheaper than prevailing in the exporting country primarily with a view to disrupt the manufacturing in India. A large tyre manufacturing capacity is lying underutilised in India which could have been meaningfully used, had the scourge of cheap imports not afflicted Indian markets.
ATMA analysis shows that to a large extent, trade agreements signed by India have catalysed the inflow of tyres into India. As such the basic customs duty on tyre imports into India (at 10 per cent) is much lower than that on natural rubber, the principal raw material. Besides, under these trade agreements, tyres can be imported in India at far lower duties and even at nil rates of duty. As a result, large scale imports have found an easy entry in India.
Just look at these figures. India-ASEAN Free Trade Agreement (FTA) was signed in early 2010 and ever since tyre imports from ASEAN countries to India has gone up by more than four times from 1279 million rupees in FY10 to 5158 million rupees in FY 15. Asia Pacific Trade Agreement (APTA) has opened the floodgates of import of tyres from China to India. After the tariff concessions announced in FY 2007, the import of tyres has gone up from 3289 million rupees in FY 07 to 9652 million rupees in FY 15 (three times higher).
Similarly, tyre imports from Japan have gone up by almost 10 times from 413 million rupees in FY 09 to 3585 million rupees in FY 15. India-Japan Comprehensive Economic Partnership Agreement (CEPA) signed in FY 11 has aided in the significant jump in imports.
By Rajiv Budhraja, Secretary General, ATMA