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Old 1st October 2014, 00:20   #1
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Post Competition Commission investigates 'cartelization' in Indian tyre industry

After the recent crackdown on the anti-competitive practices of the Indian Automotive Manufacturers in the control of the supply and availability of spare parts, the Competition Commission has lodged a fresh investigation into the allegations of "cartelization" of the tyre industry by major players.

The story began when the All India Tyre Dealer's Federation (AITDF) accused Apollo Tyres, MRF, Ceat, JK Tyres and Birla Tyres – together contributing to 90 per cent of the production – of engaging in “price parallelism” in the profitable replacement market. The dealers’ body also stated that the All India Tyre Manufacturers’ Association (ATMA) was well aware of such practices.

According to dealers, tyre makers have been consistent in increasing product prices to counter any sharp rise in the costs of natural rubber, but a decline in prices of raw material does not lead to a corresponding cut in tyre prices.
The fresh investigation comes after the Tyre Manufacturers had been given a clean chit by the CCI in an earlier Investigation that commenced in October 2012.

The October 2012 order can be viewed here:

This led to a surge in the stock outlook of major manufacturers with investor sentiment once again in their favour. (http://www.moneycontrol.com/news/bus...rs_775259.html)

The AITDF however, decided to appeal against the October 2012 order and the CCI has issued a fresh investigation into the matter. The issue has been brilliantly reported in the Millenium Post by author G Srinivasan. The article gives brilliant insight into the issue. Sections of the article have been quoted below. Link to the original article can be found here :(http://www.millenniumpost.in/NewsContent.aspx?NID=69949)

"On the tyre front, the major cost component in the input cost of manufacture is accounted for by the natural and synthetic rubber that constitutes more than 60 per cent of total cost. According to the All India Tyre Dealers Federation (AITDF), the price of natural rubber and synthetic rubber has tumbled by over 40 per cent and 21 per cent respectively in the last six quarters without any iota, if not commensurate, cut in tyre prices in the domestic replacement market. Alongside, the steady fall in global crude oil (the basic raw material in the use of other inputs such as nylon tyre cord fabric, synthetic rubber, carbon black, rubber chemicals, butadiene rubber etc) prices to $101 per barrel in the last two months has also not had any desirable dent on the tyre manufacturers cost calculation! The AITDF Convenor Mr S.P. Singh was on record that while the rise in natural rubber prices to Rs 240 per kg sent tyre prices zooming by 18-25 per cent in 2011-12, a subsequent drop in prices to Rs 145 a kg did not result in any modicum of relief in the form of lower tyre prices!"

"CCI said given a collective/general rise in price in a high raw material cost scenario, a subsequent decline in raw material costs should give an opportunity to major players to gain market share by decreasing prices before the competitor. ‘In the present case, this is not happening and during 2011-2012 onwards there seems to be a collective decision to maintain the prices’. This is prima facie a direct indictment on the collusive comport of tyre units of what is called in technical parlance ‘price parallelism’ to appropriate unjust enrichment at the cost of the hapless consumers."

"Markets and regulators take their own time to fix the faults or level the playing field with delayed justice to the eventual consumers. Sadly and starkly, this in no manner stands in the way of manufacturers making hay while the sun shines or official agencies wallow in their bureaucratic sponge beds like bovines do in the muddy water."

I feel that these developments are a beginning of a series of changes in the trade practices of the players in the Automotive Industry who have long been taking the indian consumer for granted because of loopholes in the system.
The current case between the AITDF and the manufacturers still has to come to a conclusion for the truth to finally be clear to all. But the efforts of the Competition Commission of india in bringing changes into the Automotive Sector would in my opinion require its own space for discussion as i feel there may be many more such cases of unfair practices being brought out into the open in future.

Last edited by Vijayraj1890 : 1st October 2014 at 00:34.
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Old 2nd October 2014, 11:14   #2
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Default Re: Competition Commission investigates 'cartelization' in Indian tyre industry

Thread moved from the Assembly Line (The "Assembly Line" Forum section) to the Tyres Section. Thanks for sharing!
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