The Directorate General of Anti-dumping & Allied Duties (DGAA) has recommended imposition of anti-dumping duty of US$245-452/MT (Rs 15,476-28,552) on truck and bus radial tyres (TBRs) imported/produced from China, to minimise the threat of market share loss in domestically produced radial tyres.
The current rate of 28 percent GST along with 10 percent customs duty will increase transaction cost, largely eliminating the price differential between India-made and Chinese TBR tyres.
As per a comment by ICICI Securities, “The move could lead to a reduction in share of imported Chinese tyres (currently 15-20 percent of domestic TBR demand) and could boost volumes for the domestic players. The pickup in imports of cheap Chinese TBR tyres (10x increase in volumes since FY12) has coincided with the radialisation trend in the Indian trucking business. Thus, on a segmental basis, we believe the slide in TBB segment could be arrested as its price attractiveness versus domestic TBR tyres is restored.’
Chinese imports vs domestic manufacturers
The landed price of tyre imports from China was below the selling price and cost of sales of the domestic industry. Though current exports of China to India amount to only 1.8 percent of China’ overall exports, their domestic market share had already reached 25-30 percent of domestic replacement TBR demand.
Around 115 Chinese exporters have exported TBR tyres to India. However, there are another 1,994 exporters who have exported TBR tyres to various parts of the world. With increasing number of BIS licenses being given by the government of India to Chinese exporters, the volume of imports from China is likely to increase.
There is a fear that surplus Chinese capacities coupled with its government incentives could be utilised for flooding the Indian market with Chinese-made TBRs. Even an incremental one percent diversion of Chinese tyre exports could have a significant impact on both pricing and market share.
As per ICICI Securities channel checks, a significant share of the imported, cheap Chinese tyres had lower tax compliance (e.g. VAT) which aided the price attractiveness versus incumbent offerings. Post-GST (28 percent applicable rate on top of 10 percent customs duty), which is likely to strengthen tax compliance, the price differential between the cheap Chinese tyres and India-manufactured TBR tyres is likely to come off and recent channel checks suggest it is already happening.