 "Tyres, Bridgestone, JK Tyres, MRF Tyres")
ICRA's projections for the Indian tyre industry in FY2025 indicate a moderate growth trajectory, with domestic tyre volume expansion forecasted at 4-6 per cent, down from an estimated 6-8 per cent in FY2024. While revenue is expected to grow by 5-7 per cent, operating margins are likely to contract by 200-300 basis points due to rising input costs, particularly high natural rubber and crude oil prices.
The report cites healthy demand from original equipment manufacturers (OEMs) in the passenger vehicle (PV) and two-wheeler (2W) segments, along with replacement demand, as the primary drivers of domestic growth. However, growth in the commercial vehicle (CV) segment is expected to be subdued due to a brief pause in infrastructure activities and a high base effect. The replacement market, which contributes over two-thirds of industry volume, is forecast to remain stable.
Export volumes, on the other hand, are expected to remain subdued in the near term due to muted demand in key export markets like the US and Europe, further impacted by supply chain issues arising from the Red Sea crisis.
Speaking on this, Nithya Debbadi, assistant vice president and sector head at ICRA, stated, “Tyre exports are expected to remain moderate in the near term because of muted demand growth in key export destinations, namely the US and Europe. Further, supply chain issues arising from the Red Sea crisis have raised freight costs (resulting in increased tyre costs) and elongated transit times. In terms of domestic factors, despite an elevated base, consumer segments are expected to record mid-single-digit growth (PV at 4-6 per cent, 2Ws at 5-7 per cent) on the back of healthy underlying demand. However, growth in the CV segment is expected to be impacted by the brief pause in infrastructure activities due to the parliamentary elections and the Model Code of Conduct currently in force.”
ICRA expects the industry's operating margins, which expanded to 15-17 per cent in FY2024 due to softening raw material prices, to contract in FY2025 as natural rubber prices have increased by 25-30 per cent in the past four months.
Investments in new capacity addition are likely to be moderate as existing capacities have adequate headroom, but the industry is expected to focus on debottlenecking, process improvements, and research and development for sustainable and smart tyres. With rising environmental concerns, the industry is also expected to invest in tyre retreading, which is forecast to grow at a compound annual growth rate (CAGR) of 7-9 per cent during FY2023-FY2026.
Overall, ICRA's outlook for the Indian tyre industry in FY2025 suggests moderate growth, with some headwinds due to rising input costs. The industry is expected to focus on operational efficiencies and technological advancements to navigate these challenges.
