Bridgestone may raise tire prices 30% next year

JAKARTA (JP): PT Bridgestone Tire Indonesia said yesterday it may have to raise the price of its products 30 percent next year to meet increasing production costs.

The tire company's marketing director, H. Kawano, said the price adjustment was long overdue because tire production costs had skyrocketed during the currency crisis.

"The rupiah's value has dropped sharply against the U.S. dollar, so we need to adjust our prices by between 25 and 30 percent," Kawano said at a product launch.

However, he acknowledged that the market may not accept the mark up.

Kawano said the fall in the rupiah's value by over 50 percent against the American greenback since the monetary crisis hit the country in early July, had taken a big chunk out of the company's revenue due to higher production costs.

Raw materials make up 75 percent of the company's production costs.

He said 70 percent of the raw materials were purchased locally but the remainder were imported.

However, even the locally purchased materials, such as rubber, had to be paid in U.S. dollars, he said.

"This is a heavy burden on the tire industry."

Kawano said he expected tire demands to drop slightly next year, due to a slowdown in the automotive industry.

He said Bridgestone anticipated domestic demand for original equipment manufactured tires (those produced for vehicle manufacturers) to drop to about 1.75 million tires next year from 1.86 million tires this year.

But some people have predicted that car production will drop between 25 percent and 30 percent to as low as 250,000 cars from about 350,000 cars this year, he said.

"We expect our sales of original equipment manufactured tire production to drop to about 860,000 pieces next year," he said, adding that the demand for Bridgestone products in the January to October period reached 850,000.

Despite the lower car production rate, Kawano said he was optimistic that the demand for replacement tires would continue to grow.

Demand for replacement tires would rise to 9.02 million next year from around 8.5 million this year, he said.

Bridgestone expects to supply about 3.44 million tires next year, he said, adding that the company had supplied 2.38 million tires in the first nine months of this year.

The company also expected its exports to rise by 15 percent next year, he said. It currently exports 10 percent of its tire sales or about 700,000 tires to 35 countries, he said.

Bridgestone is 43 percent owned by PT Sinar Bersama Makmur, 52 percent by Japan's Bridgestone Corporation and 6 percent by Japan's Mitsui and Co. Ltd.

The company has the capacity to produce about 130 tons or about 450,000 tires a day in its manufacturing plant in Bekasi, West Java.

It is currently building another manufacturing plant on a 37- hectare plot in Kerawang, West Java.

Kawano said the new plant was expected to start operation in mid next year, with an initial production capacity of 25 tons a day or about 100,000 tires.

He said the investment in the new plant would be about US$80 million.

The company yesterday launched a new tire product called the Techno 350 Premium, which uses a new technology called Donuts -- Driver Oriented New Ultimate Tire Science. (das)