Despite the initial setbacks caused by rise in cost of raw materials, especially crude-based ones, and the supply crunch in natural rubber, Indian tyre industry posted impressive growth during 2018-19. Growing volume in both OE and replacement tyres and rise in exports boosted revenues of the industry. With stable demand outlook and strong credit profile, domestic tyre makers are expected to make significant investments in capacity addition in the coming years.
The Indian tyre market is estimated to have grown by 9-11% unit volume wise and 11-13% tonnage wise domestically in the financial year 2018-19, according to the credit rating agency ICRA.
The OE tyre segment witnessed a strong demand with a 10-12% growth in FY2018-19 , as against a 13.3% growth in 2017-18, despite subdued vehicle production levels in the last six months due to ‘dip in consumer sentiments’ on the back of rise in vehicle costs and softened rural demand, ICRA says.
The replacement tyre demand in 2018-19 was also higher than the previous year. According to ICRA, pick-up in infrastructure activities and rising consumption boosted the demand for replacement tyres which is estimated to have increased by 7-9% in terms of unit volume in 2018-19 against a muted growth in FY2017-18.
However, the demand for replacement tyres slowed since November 2018 due to tight liquidity conditions, but a strong H1 has neutralized the impact.
“For FY2019, tyre industry revenue growth is pegged at 14-15% with operating and net margins of about 14% and 7% respectively, almost in line with last year. For FY2020-22, revenue growth is projected at 9-10% with operating and net margins at 14-15% and 6-7% respectively”, says K Srikumar, Vice President and Co-Head, Corporate Ratings, ICRA.
“ICRA expects the domestic tyre demand to grow by 7-9% over the next five years (FY2019-23). With stable demand outlook and strong credit profile, domestic tyre makers will continue to invest in capacities. Based on announcements, the industry is likely to witness a capacity addition of over Rs 200 billion in the next three years,” Srikumar adds.

(Read full story in May-June 2019 issue of Rubber Asia)