Rural, semi-urban areas bright spot for tyre industry amid Covid-19 challenge: MRF

Robust demand for two-wheelers and tractors across rural and semi-urban areas in the country remain bright spot for domestic tyre industry amid the challenging business environment due to Covid-19 pandemic, according to MRF Chairman and Managing Director KM Mammen.

Normal monsoon and expectations of a bumper crop augur well for the rural economy, he said while addressing company's shareholders through its annual report for 2019-20.

"It has been two months since the government lifted the lockdown and we are still finding our way to establishing economic levels of production. We have had to deal with Covid-19 cases in our manufacturing plants from time to time and this has affected our production momentum," Mammen noted.

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Fortunately, demand for tyres, particularly from the farm and commercial sector, has not been affected much and the company is able to cater to these market segments, he added.

Mammen noted that the forecast of a normal monsoon and its timely onset has boosted the expectations of a bumper crop output, which augurs well for the rural economy.

"This can strengthen rural income and demand, which will see a spurt in demand for two-wheelers and tractors. Thus, a recovery in the rural economy will be a relief to the Indian tyre industry," he added.

Terming government's decision of prohibiting import of tyres as a welcome step, Mammen said the initiative would definitely alleviate industry concerns to a great extent.

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The tyre market leader noted that currently the automobile industry is passing through tough times as demand for four-wheelers and two-wheelers is at an unprecedented low.

"The industry has moved to BS-VI vehicles which are slowly getting absorbed in the market and we are expecting to see a fair growth in demand for vehicles, and I am sure that the automobile industry will come out of this slump with reasonable growth in the near future," Mammen said.

He said MRF, which reported a total income of Rs 16,322 crore for the year ended March 31, 2020, is focused on strengthening its position through this period of uncertainty with uncompromising emphasis on quality.

"It has been one of the major factors helping us take a leadership position in the industry in almost all the segments of the market," Mammen said.

The company noted that automobile industry would see new trends, with the industry trying to recover from the Covid-19 pandemic-induced recession.

There could be a preference for personal mobility, with entry level vehicles standing to benefit, it said.

E-commerce would see more traction which will drive sales of light commercial vehicles, while two-wheelers also could see traction since they are used for last mile delivery, it said.

The way forward for the automobile industry and the tyre industry is not clear given the uncertainties brought about by the pandemic and the road to recovery will not be smooth given the impact on disposable incomes, consumer behaviour and credit availability, the company noted.

Some experts estimate that auto industry volumes will be down by 25 per cent in financial year 2021, MRF said.

"The bright spot would be the rural and semi-urban areas. Tractors and two-wheelers are likely to do better than other segments," it added.