The automotive industry slowdown has caught up with the tyre industry. The RPG group-owned Ceat Tyres has become the first company to announce a lay-off as inventory has piled up. According to industry officials, almost every tyre company — be it Apollo, MRF or JK Tyres — may have to consider cutting production.

Paras Chowdhary, MD of Ceat Tyres, told Financial Chronicle that the company had cut production by 5-8 per cent at the Bhandup plant in Mumbai. “We are going in for a lay-off for two days as there is accumulation of inventory; we expected to get rid of it in two days.”

The current lay-off at the Bhandup plant followed an inventory build-up of seven to eight days’ stock, instead of the normal one to three

days’ stock.

Ceat has cut production to cope with the lean demand in the monsoon season, he said, adding that sales might go up later this month. The general economic slowdown is also another big factor. Because of this truck movements have steadily declined, said an industry official. “The recent increase in tyre prices, floods in Bihar and erratic rains elsewhere have added to the tyre industry’s woes.

“Dealers are refusing to take fresh stocks. As a result, companies have seen a big inventory pile-up,” he added.

Apollo Tyres put its Perambra plant in Kochi under lockout for about two weeks from August 16. The lockout followed the company’s decision to increase productivity from 280 tonnes to 318 tonnes a day. The company now claims in a statement that the trade unions have now agreed to the increased workload in the mixing and tyre curing sections.

The lockout, however, did not affect tyre supplies as the company increased output at its other plants. “We ensured that there was no shortfall in supplies of cross-ply tyres in the market,” said Satish Sharma, the company’s chief of India operations.

A S Mehta, marketing director of JK Tyres, claimed his company was not looking at a production cut. “July and August have traditionally been low-sales months. Sales will pick up in September,” he said.

Arnab Banerjee, Ceat sales and marketing vice-president, said the replacement market was always down during the monsoon season. “The decline in automobile sales has added to the worry of tyre manufacturers. Sales are expected to pick up in September. Even if sales decline in India, we have enough exports to take care of our bottom line,” he said.

JK Tyres rules the tyre market in India with an over 40 per cent share. It is followed by Ceat and Apollo. Indian tyre companies produced over 81.1 million tyres in 2007-08.