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COVID-19 UPDATE
Covid Spread Pushes Indian Retreading Industry into Uncertainty
The Indian government has extended the 21-day lockdown by another fortnight to arrest the spread of Coronavirus in the country. Lockdown was expected to end on 14th April but with the virus cases surging, the government further extended the lockdown period till the end of 3rd May.
lockdown is expected to lead to recession.
If closure is prolonged, the retreading industry in India is expected to head for a downward spiral as tread producers and retreaders have to meet the operational challenges of salaries, payment to their suppliers, EMIs, rent, retaining workforce etc.
Recession looms over Indian economy
“The Indian economy as a whole is going to suffer a lot as economists are predicting recession, and the retreading industry will suffer along with the other sectors of the economy. Once the trucks start moving retreading will pick up,” thinks Paulose Varughese, Director, Midas Treads (India) Private Limited.
Retreaders are clueless about the evolving business scenario and terming it as period of complete uncertainty. “It all
depends on how long closedown lasts. This is a period of extreme uncertainty for all businesses and retreading is no different,” said a concerned Karun Sanghi, Managing
Director, Tyresoles (India) Private Limited.
Long shutdown creates labour shortage
The shutdown is expected to lead to labour shortages on the resumption of production as a large chunk of labour moved back to the villages from cities on the announcement of lockdown. “Initially all industries will face labour shortages, moreover, people will get more conscious in spending due to the economic slowdown and skewed cash flow,” said Shankar Vadivel, Director, Elgitread (India) Ltd.
Elgi is optimistic about retreading as the Coimbatore based company believes there is scope for high demand for retreads since it is the cheapest alternative to new tyres. Commenting on market recovery considering the rising number of Covid cases, Shankar admits, “The virus outbreak happened at a bad time from an economic point of view. Looking at what is happening here in India and in the rest of the world it is hard to put a timeline for recovery as the number of Covid-19 cases are rising. There are some statistics that
say that this current situation will be around till about June.”
Retread volumes on downward trend India’s retreading industry has been witnessing declining volumes since 2015. The industry is nowhere near where it used to be about five years ago. “Most retreaders are down by about 40% from the peak business in 2015 -16. Last year volumes declined by an average of 20%,” observed Sanghi, who owns Mumbai headquartered Tyresoles, one of the largest retreaders in the Western part of the country.
Financial restructuring led to liquidity crunch
The present dispensation also demonetised high-value currency in its earlier term, which led to liquidity crises in the market. “The effect of demonetisation has lasted for around 4 years and the impact of the virus and nationwide closedown might spreads over to the next 3-4 years before normalcy is achieved,” stated Paulose Varughese.
The industry continues to reel under the pressure of demonetisation and the hasty implementation of GST to bring the whole country under a
Shankar Vadivel
The 40-day long lockdown has severely impacted the country’s economy, which has been consistently recording a drop in GDP over the last five years. The current
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