X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Tyres: Threat from China - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Dec 22, 2000

    Tyres: Threat from China

    The Indian tyre industry has seen a decline in imports from 240,000 car radial tyres in FY98 to 120,000 car radial tyres in FY2000. However things are changing in the current year. It is faced with the pressure of cheaper Chinese imports, which have made an inroad into the Indian tyre market.

    Even though the high import duty on tyres at 38.5% along with countervailing duties acts as a strong entry barrier, countries like China and Korea have penetrated the Indian market. The main reason behind this is that despite high duties imported Chinese tyres are still cheaper due to their lower cost of production.

    In the current year domestic tyre production for the period April-October 2000 at 5 m tyres was marginally lower than the figures for April-October 1999. This being mainly due to lower demand from domestic manufacturers as there has been a slowdown in the domestic automobile market and the fact that cheaper imports have flooded the market. Domestic commercial vehicle (CV) & car manufacturers cut vehicle production in the current year due to lower demand in the automobile sector.

    In the past tyre imports never made a large impact on the domestic market. This being due to the fact that MNC auto majors who set up shop in India turned to the domestic market as they were cheaper and of a better quality. However at that time China was not an aggressive player in the domestic tyre market. Earlier even in the replacement market tyre imports never made an impact as most foreign importers lacked the distribution and marketing networks to penetrate the local markets.

    All kinds of Chinese goods have flooded the Indian markets in the past few years. Hence tyres too are not an exception. In the current year around 50,000 Chinese tyres are likely to be imported into the market. India is facing the pressure from Chinese tyre manufacturers not only domestically but is also facing stiff competition from them in the export markets. This year tyre exports are slated to be more or less stagnant.

    Lower domestic demand has taken its toll on MRF, India's largest tyre manufacturer, having a 22% market share. The company's operating margins fell from 14.4% in 3QFY00 to 10.2% in 3QFY01. Lower demand and higher raw material expenses affected the company's margins. For the 3QFY01, the company's net fell by 46% to Rs 120 m. As a result of the above factors the company's share price at Rs 1,192 is low as compared to its 52 week high of Rs 2,820. It is trading at a price to earnings multiple of 5.1x FY00 EPS of Rs 233.

    Imports from China have not affected MRF to a large extent yet as the figures are fairly low. It is likely that in future if imports grow rapidly MRF and the other players which are already facing difficult times, will face even tougher times ahead.

     

     

    Equitymaster requests your view! Post a comment on "Tyres: Threat from China". Click here!

      
     

    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    MRF LTD. SHARE PRICE


    Aug 16, 2017 (Close)

    TRACK MRF LTD.

    • Track your investment in MRF LTD. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    MRF LTD. - BALKRISHNA IND COMPARISON

    Compare Company With Charts

    COMPARE MRF LTD. WITH

    MARKET STATS