Ceat expedites investment in capacity as tyre demand makes a sharp recovery
The RPG Group-owned tyre maker will make investments about Rs 1,200 crore to extend manufacturing capacity over the subsequent 18-24 months, as a part of a four-year, Rs 3,500-crore capex plan, which it had placed on maintain as a result of Covid-19 pandemic final yr after pumping in over Rs 2,200 crore.
Production is excessive throughout vegetation and there has already been a capacity constraint for farm gear tyres and a transient scarcity of two-wheeler tyres throughout Diwali, Anant Goenka, managing director of Ceat Ltd informed ET.
“Utilisation levels are high. We have done a large investment and those expansions are happening now. It has been fortunately well-timed,” Goenka mentioned.
Goenka mentioned there have been issues inside the firm in April final yr on the onset of the virus outbreak over the returns on investments in plant capacity as gross sales nosedived in the course of the lockdowns and brief time period outlook was bleak, however that “things bounced back quite well and quite fast.”
The firm is investing in doubling passenger automobile tyre manufacturing capacity to 40,000 a day. Already, 5,000-6,000 tyres of the brand new capacity are being manufactured a day, and the rest shall be achieved in the subsequent 9-12 months, he mentioned.
The firm expects exports to double over the subsequent 2-3 years with a sharp give attention to Europe. It has additionally benefited from restrictions on import of tyres since June this yr, which has opened up about 3-5% of the market earlier cornered by tyres from overseas, Goenka mentioned.
Leading world tyre maker Michelin mentioned in a letter to sellers final week that it might not be capable of provide passenger automobile tyres until the federal government eases import restrictions. This is predicted to additional help the enterprise of native tyre makers such as Ceat.
The firm recorded its highest-ever income in the course of the December quarter and expects the momentum to proceed into the subsequent two quarters.
“Covid-19 is done and dusted in terms of saying ‘we are going back to pre-Covid-19 levels’. This quarter (Q3) has been our highest ever in terms of revenue and the same was true in the previous quarter as well, and that too in an environment where the new commercial vehicle market is depressed,” Goenka mentioned.
Commercial autos gross sales, which had been depressed even earlier than the outbreak, have but to bounce again.
