Growing local demand has driven Sri Lankan tire major CEAT Kelani Holdings to boost production and increase its monthly purchases of natural rubber (NR) in the domestic market by 35% by September, according to a report in the local press.
The country’s leading tire maker sources its entire NR needs locally. Its purchases in September 2020 are expected to amount to 500 tonnes. This will generate about Rs. 150 million ($808,700) in revenue for Sri Lankan NR producers, in the country’s rubber growing areas such as Kegalle, Kalutara, Ratnapura and Monaragala.
According to CEAT Kelani, during the pre-COVID19 pandemic months of December 2019 to February 2020, its purchases of rubber averaged 366 tonnes a month, generating average monthly revenue of Rs. 107 million ($576,800) for local NR suppliers.
The company’s Managing Director, Mr. Ravi Dadlani, noted that one of the major reasons for CEAT Kelani’s existence in Sri Lanka is NR availability, adding that the company has always been focussed on maximising local value addition. He explained that CEAT Kelani has ramped up production in response to the temporary tire import restrictions imposed by the Sri Lankan government, leading to an increase by as much as 40% in value terms, in its payments to domestic NR producers.
The Sri Lankan government is temporarily curbing imports and calling for import substitution, in order to conserve foreign exchange. CEAT Kelani is supporting the government initiative by ramping up production of truck, bus, radial and two-wheeler tires.
The tire manufacturer engages with a base of nearly 30 dealers for the purchase of natural RSS grade rubber and carries out transactions with them on a daily basis, as well as providing feedback and imparting knowhow to the dealers, to help them enhance the quality of RSS grades. According to Mr. Dadlani, CEAT Kelani periodically audits dealers’ operations and helps them maintain high quality standards, due to which many dealers are now recognised as ‘CEAT approved NR dealers’, which helps them not just become consistent suppliers to the tiremaker, but also helps them to establish themselves as quality suppliers of RSS grades to rest of the local industry.
As a result of CEAT Kelani boosting production of truck and bus tires since the start of the pandemic-linked lockdown, the tiremaker now produces 100% of the segment’s requirements, enabling the Sri Lankan government to save Rs. 11 billion ($59.3 million) a year in foreign exchange. The company has also increased its production of two-wheeler tires by 85%, making possible a further saving of Rs. 350 million ($1.88 million) a year through import substitution.
CEAT Kelani currently has the capacity to produce two million tires annually across multiple categories and a further addition of 200,000 car and van radial tires is expected soon, with new machinery being installed, pending the arrival of technologists from overseas to commission the additional capacity. CEAT Kelani has kept the prices of its tires unchanged since December 2019, in order to support customers and the economy, despite the additional investments made in increasing capacity and an increase in market prices due to demand.
The tiremaker is considered one of the most successful India-Sri Lanka joint ventures in the manufacturing sector. The joint venture’s cumulative investment in Sri Lanka to date totals Rs. 8 billion ($43.1 million), including Rs. 3 billion committed in January 2018 for the expansion of volumes, technology upgrades and new product development. The company’s manufacturing operations in the country include pneumatic tires in the radial (passenger cars, vans and SUVs), commercial (Bias-ply and radial), motorcycle, three-wheeler and agricultural vehicle segments.