Tuesday March 25, 2008

Michelin new car tyre prices to be indexed against oil

channelnewsasia.com :

Michelin, one of the world's leading tyre makers, on Friday [21 Mar 2008] hiked prices and said that from now its charges for auto manufacturers would be indexed against the cost of oil. "From April 1, the price of (Michelin) tyres will be adjusted each time the price of a barrel of Brent (North Sea) oil moves by five dollars (3.24 euros)," a company spokesman said.

"This framework, which can evolve, will apply to tyres for cars and vans sold to vehicle manufacturers and not in the retail sector," he said. "About 60 per cent of the cost of making a tyre for cars or vans arises from products made from oil," Michelin said. "The recent spectacular rise in the price of (oil) therefore has an impact on the cost of Michelin tyres."

- That is called passing costs on to consumers, and that is the business-savvy thing to do. There isn't much of an alternative, really. Manufacturers can absorb the rising costs and eventually go under, or embark on cost-cutting measures, which many of them have done, and I suspect some of them are already starting to reach the limits of things they can cut back on.

See also :

1. Gold and oil soar as inflation fears grow
2. Oil hits $111.00 high, breaking records 7 trading days in a row
3. Hyper-inflation : early warning signs

(2008-03-25 16:14:36 SGT) [Energy] Permalink

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