Ceat expedites investment in capacity as tyre demand makes a sharp recovery

Mumbai: Ceat will move quickly to expand capacity and resume frozen capital expenditure, buoyed by the sharp recovery in tyre demand, its top executive said.

The RPG Group-owned tyre maker will invest about Rs 1,200 crore to increase production capacity over the next 18-24 months, as part of a four-year, Rs 3,500-crore capex plan, which it had put on hold due to the Covid-19 pandemic last year after pumping in over Rs 2,200 crore.

Production is high across plants and there has already been a capacity constraint for farm equipment tyres and a brief shortage of two-wheeler tyres during Diwali, Anant Goenka, managing director of Ceat Ltd told ET.

“Utilisation levels are high. We have done a large investment and those expansions are happening now. It has been fortunately well-timed,” Goenka said.

Goenka said there were concerns within the company in April last year at the onset of the virus outbreak over the returns on investments in plant capacity as sales nosedived during the lockdowns and short term outlook was bleak, but that “things bounced back quite well and quite fast.”

The company is investing in doubling passenger car tyre manufacturing capacity to 40,000 a day. Already, 5,000-6,000 tyres of the new capacity are being manufactured a day, and the remainder will be achieved in the next 9-12 months, he said.

The company expects exports to double over the next 2-3 years with a sharp focus on Europe. It has also benefited from restrictions on import of tyres since June this year, which has opened up about 3-5% of the market earlier cornered by tyres from abroad, Goenka said.

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Leading global tyre maker Michelin said in a letter to dealers last week that it would not be able to supply passenger car tyres till the government eases import restrictions. This is expected to further aid the business of local tyre makers such as Ceat.

The company recorded its highest-ever revenue during the December quarter and expects the momentum to continue into the next 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 said.

Commercial vehicles sales, which were depressed even before the outbreak, have yet to bounce back.



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