Continental to buy Modi’s tyre unit

Shares in Modi Rubber shot up 10 per cent,its daily limit,to Rs 75.35 on the Bombay Stock Exchange.

Continental,the world’s fourth largest tyre maker with reported sales of 26 billion euros ($37.5 billion) in 2010,said Modi Tyres would become a fully owned subsidiary and would focus on local production and distribution of radial truck and bus tyres as well as radial car tyres.

“This development underlines Continental’s commitment to the Indian market and is part of the company’s strategy to invest in growing markets in Asia for its core businesses,” it said in a statement.

Auto sales in India grew a record 30 per cent in 2010/11 to 1.98 million units,driven by a burgeoning middle class in Asia’s third-largest economy,easier access to loans and a wider choice of models.

But higher input costs and interest rates are seen crimping demand for cars and sales growth is expected to more than halve in 2011/12 to 12-15 per cent.