NR prices "are killing us" - Apollo's Kanwar

By David Shaw, ERJ staff

Mumbai, India -- Neeraj Kanwar, chief executive of Apollo Tyres, told ERJ, “In India [the price of NR] is killing us. We are up about 40 percent quarter-on quarter."

Kanwar continued, “We are not able to pass those on to the customer. The Indian customer is very price sensitive and they will not pay those prices.” He said the effect is to reduce margins by half in Apollo's Indian tyre business.

The price increases have affected OE tyres much more than replacement market. He said the price differential between these two segments of the truck tyre business is widening. Previously, a replacement tyre was 10 to 11 percent more expensive than an OE tyre, but that gap has widened to 25 or 30 percent, said Kanwar. “It is a loss-making proposition for the company.” He said truck makers approach them, and Apollo has to charge a commercial price, and this may be part of the story behind rumours of truck tyre shortages among Indian truck makers.

Peter Becker, Apollo's R&D head, said that in India, raw materials contribute around 75 percent of the costs of making a tyre, compared to around a third in Europe, where labour is a much bigger component.

Consequently, the impact of higher NR prices is magnified in India. That, combined with a flood of cheap imported Chinese tyres, is making business difficult in India today, said Becker.

He said that in common with other tyre makers, Apollo is investigating substitution of NR by synthetic alternatives, but that performance can be affected, so there is not much scope for substitution.

Doug Bolduc of ERJ's sister publication, Automotive News contributed to this report.