MRF sees spurt in demand for two-wheelers, tractors

Tyre manufacturer MRF Ltd. said it saw a spurt in demand for two-wheelers and tractors even as the way forward for the automobile and the tyre industries remained unclear on account of the pandemic, said a top executive.

“The forecast of a normal monsoon and its timely onset has boosted the expectations of a bumper crop output and this augurs well for the rural economy,” wrote K.M. Mammen, CMD in a note to shareholders.

“This can strengthen rural income, 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 tyre industry,” he added.

“Currently, the automobile industry is also passing through tough times as the demand for four and two-wheelers is at an unprecedented low,”he said. “The industry has moved to BS-VI vehicles, which are slowly getting absorbed into the market. 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,” he said.

In the coming year, the automobile industry would see new trends, with the industry trying to recover from the COVID-19-induced recession. There could be a preference for personal mobility with entry-level vehicles standing to benefit. E-commerce would see more traction, which will drive sales of light commercial vehicles. Two-wheelers also could see traction since they are used for last-mile delivery, MRF officials said.

The road to recovery will not be smooth, given the impact on disposable incomes, consumer behaviour and credit, they said. The bright spot would be the rural and semi-urban areas.

During FY20, the company which reported a sales of ₹16,322 crore, said there was a 3.5% decrease in all segments in total tyre production.

However, the company’s exports rose to ₹1,651 crore from ₹1,566 crore in the year-earlier period due to superior product offerings across categories coupled with a focus on channel development across all key markets.

Africa, Central Asia, SAARC and some ASEAN countries will continue to drive growth for the company in the coming years. However, import restrictions and increased regulations in countries like Indonesia and Thailand will act as a dampener to growth, the company said.