Tyre stocks wobbled as news of US sanctions on crude oil imports from Iran and rising crude oil prices hit the Street on Monday. The impact of rising crude oil prices on tyre companies’ profits, though not immediately, is now a growing concern.
Crude oil derivatives such as carbon black, synthetic rubber and nylon tyre cord fabric together make up nearly half the cost of producing a tyre. Certainly, the sudden 3.5% rise in the price of crude oil within three days, and 35% since January, signals a squeeze on profits for tyre makers.
Besides, the threat to costs comes when the auto industry is steering through rough terrain. Auto sales in the country during FY19 grew at a sluggish 5.2%. In FY18 it grew at 14.2%. Production cuts by automobile manufacturers has resulted in lower demand for tyres, among other components.
