Alternative demand to drive tyre sector revenues by 7-8% this fiscal: Crisil

The home tire sector is ready to see regular income development of 7-8 per cent this fiscal, pushed by alternative demand that accounts for half of annual gross sales, whilst offtake by unique tools producers (OEMs) will seemingly be subdued and exports regular, stated Crisil Rankings in a report.

The report added that the rising premiumisation is anticipated to offer a slight leg-up to realisations. Nonetheless, escalating commerce tensions and the danger of dumping by Chinese language producers diverting inventories due to US tariffs might pose challenges.

Working profitability is more likely to stay regular at 13-13.5 per cent, supported by secure enter prices and wholesome capability utilisation.

This, together with robust accruals, lean steadiness sheets and calibrated capital spending, ought to assist maintain the sector’s secure credit score outlook, the report added.

The Indian home demand stays the mainstay, propelling 75 per cent of complete quantity with exports making up the remainder.

Anuj Sethi, Senior Director, Crisil Rankings, stated, “Quantity development is seen at 5-6 per cent this fiscal, mirroring final fiscal. The alternative phase (accounting for 50 per cent of quantity) is ready to develop 6-7 per cent on the again of a big car base, robust freight motion and rural restoration. OEM quantity (25 per cent) will seemingly rise 3-4 per cent, supported by regular two-wheeler and tractor gross sales, and modest development in passenger automobiles and business automobiles. Export quantity (25 per cent) is anticipated to develop 4-5 per cent, supported by demand from Europe, Africa and Latin America.”

The report additional added that the export momentum, nonetheless, comes with dangers. The US, accounting for 17 per cent of India’s tyre export quantity final fiscal, and 4-5 per cent of total business quantity, has imposed reciprocal tariffs on a number of Indian items, probably eroding value competitiveness. And steep US tariffs restrict China’s entry to that market, elevating the danger of extra provide being diverted into price-sensitive markets comparable to India.

To curb low-cost imports, India imposes anti-dumping and countervailing duties, together with a 17.57 per cent levy, on giant truck and bus radial tires from China. Nonetheless, a broader inflow of low-cost tyres throughout different segments might strain home realisations with out well timed safeguards.

In addition to, stiff competitors within the alternative market will maintain working profitability rangebound at 13.0-13.5 per cent this fiscal. With practically half of the uncooked materials imported, the sector is uncovered to international costs and fluctuations in international trade charges.

Poonam Upadhyay, Director, Crisil Rankings, stated, “India’s tyre sector, grappling with margin strain, might see value competitors intensify if US tariffs push low-cost Chinese language merchandise being dumped. Aggressive depth is already capping realisations within the alternative phase, so the danger of extended under-recovery of enter value stays excessive. To counter, producers are more likely to preserve capital expenditure (capex) at ~Rs 6,000 crore this fiscal, targeted on high-utilisation passenger automobile radials and two-wheeler capacities, together with automation and backward integration to enhance value effectivity and defend profitability.”

In fiscal 2025, pure rubber costs surged 8-10 per cent owing to produce disruptions and as costs of crude-linked inputs comparable to artificial rubber and carbon black rose 10-12 per cent. This led to margin erosion by 300 foundation factors, given the restricted value pass-through within the OEM and alternative segments, the report added.