Indian tyre manufacturers set for 7-8% revenue growth in FY25: Report

Domestic demand and replacement segment key drivers

Indian tyre manufacturers are projected to achieve a 7-8% revenue growth in the current fiscal year (FY25), driven by a 3-4% increase in both prices and sales volumes, according to a report released by Crisil Ratings on Monday.

This growth would mark a second consecutive year of single-digit revenue expansion for the sector, though it represents a significant improvement compared to the previous fiscal year.

The report noted that, after a compound annual growth rate (CAGR) of 21% between FY2021 and FY2023, tyre makers are now entering a phase of more modest growth.

Domestic demand remains the backbone of the industry, accounting for 75% of sales by tonnage, with exports making up the remainder. Of the domestic demand, two-thirds comes from the replacement segment—spare tyres for vehicles already on the road—while the rest is supplied to original equipment manufacturers (OEMs).

Anuj Sethi, Senior Director at Crisil Ratings, highlighted that this fiscal year, the bulk of volume growth would come from the replacement segment, particularly driven by demand from commercial and passenger vehicles. However, OEM demand is expected to grow at a slower pace, with a forecasted increase of just 1-2%, largely due to sluggish commercial vehicle sales.

With tyre makers operating at 80% capacity, manufacturers are continuing to invest in expansion. The report estimates that tyre companies will invest approximately Rs 5,500 crore in this fiscal year to enhance production capabilities and meet growing demand.

The government’s efforts to support domestic producers are also playing a crucial role. In a bid to reduce competition from cheaper imports, the Indian government recently extended the countervailing duty on Chinese radial tyres for another five years. This measure is expected to provide some relief to Indian manufacturers.

While domestic demand remains robust, export growth is expected to be muted at just 2-3% in FY25. This slowdown is primarily due to weaker demand in key markets such as North America and Europe, which together account for around 60% of India’s tyre exports.

Additionally, ongoing supply-chain disruptions, worsened by geopolitical tensions, have led to higher freight costs and longer transit times, further dampening export prospects.

One of the major challenges facing tyre manufacturers is the surge in natural rubber prices. Rubber, which makes up about half of the raw materials for tyre production, has seen price increases due to a global shortage. This shortage has been exacerbated by adverse weather conditions in major rubber-producing countries such as Thailand and Vietnam.

In response to rising input costs, tyre manufacturers have been raising prices gradually throughout the fiscal year, a move that has contributed to the expected revenue growth.

Despite these challenges, Crisil’s report notes that the sector’s strong balance sheets and ongoing capacity expansions will help maintain stable credit profiles for tyre manufacturers.

Overall, while revenue growth for Indian tyre makers will be more moderate compared to the high-growth period of FY2021-2023, the sector remains well-positioned to continue benefiting from strong domestic demand, especially in the replacement market. However, external factors, including global rubber price fluctuations and export challenges, will continue to influence performance in the year ahead.

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