Ceat Ltd. to hike price by 1 to 2 per cent from January, 2011

Sometime from now, the Indian auto biggies announced the price hike on their respective cars by next year blaming it on the increasing hike of the natural rubber. And now, it is the time for the Indian tyre companies to raise its price on their products owing to the increased price of natural rubber. Recently, Ceat Ltd., the fourth biggest tyre manufacturer in India declared the price hike of 1 to 2 per cent on its tyres from January, 2011. The company still believes that big increment in the price will not help. The upsurge in the price of natural rubber and other input cost such as production cost as well as increment in the steel prices are major causes of the price hike in the domestic auto industry.

As per the reports, the price hike on the natural rubber has squeezed the profit margins of the tyre manufacturers as natural rubber in India has already witnessed a rise of almost 50 per cent in this current year. As per the government, it has reduced the import duty on the natural rubber from 20 per cent to 7.5 per cent for the imports coming to 40,000 tonnes till 31st March to balance the supply.

As per Arnab Banerjee, the Executive Director of Operations in Ceat Ltd., stated that, the company will increase the price at low margin as bigger increment will not be beneficial. Though he believes that, minor price hike will be a continuing one. It is also being learned that, after 31st March, 2011, the import duty is expected to be reinstated on 20 rupees per kg or 20 per cent whichever is less.

Apart from Ceat India Ltd., another well know tyre maker, JK Tyres and Industries is also increasing the price on its tyres. As per the reports, the hike will be around 5 per cent in the coming year. The tyre company is saying that the accelerating price of the natural rubber has forced the company for the hike in its prices. The JK Tyre and Industries are raising the prices on both truck and radical tyres and they also cleared the air that if the price of the natural rubber keeps on increasing with this speed, it might have to increase the price of its tyres again.

Before the tyre companies, Indian auto biggies, Volkswagen, General Motors had announced a hike from 1.5 to 3 per cent on its cars. The auto giants say that from a long time, the price of inputs such as cost production, price of natural rubber and steel were raising continuously. The companies were trying to curb the price hike but now as the profit margin are dimming, it is unlikely for the company to maintain the quality of its cars, so they are forced to raise the prices.

Only time will tell if car buyers will have to bear further price increase despite Government's initiative to slash import duty on natural car components.

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