Car and two-wheeler tyre prices have gone up by 7 per cent in the past few months as a result of supply failing to meet demand. While car production has increased by a large percentage in the festival season, production of tyres has not kept pace. Tyre-making is a capital-intensive activity, and there has been little capacity addition at tyre companies in the past year because of the economic recession. To make matters worse, the country’s biggest tyre maker, MRF, was hit by a labour strike in August. As a result, in this time of festival boom, tyre manufacturers are not being able to meet the increased demand from auto companies. Low tyre supplies may also impact car production by 5-10 per cent.
Due to shrinking tyre inventories, vehicle owners may now have to pay 5-7 per cent more (Rs 150-200) for each new tyre they buy, while car companies will have to absorb the additional cost of about Rs 800 for each car they sell. The situation is expected to improve after October, when the festival season ends, and auto sales fall. By the end of the year, tyre companies too will have added fresh capacities.
