CEAT Ltd Management Discussions

In the reporting year, the global automobile sector faced challenges from commodity inflation, geopolitical tensions and shifting regulations. Despite this, it saw strong growth driven by rising demand, improved semiconductor availability and increased adoption of electric vehicles. Key industry priorities include building a resilient, sustainable value chain and integrating smart mobility. Consumer preferences are shifting toward SUVs and EVs, while India is gaining traction as a key manufacturing hub amid global supply chain diversification.

The Indian Automobile Industry showed strong growth in FY 202425, with a 7.3% increase in domestic sales and a 19.2% rise in exports, fuelled by global demand and supportive government policies. Passenger Vehicles reached record sales of 4.3 million units, with Utility Vehicles leading the growth. The TwoWheeler segment saw 19.6 million units sold, driven by rural demand and a rise in electric vehicle sales, which now make up over 6%. ThreeWheelers hit record sales and Commercial Vehicles showed recovery in Q4. With stable macroeconomic conditions and government support for electric vehicles, the industrys outlook for FY 202526 remains positive, focusing on sustainable mobility and global competitiveness.

India is advancing in its efforts to cut greenhouse gas emissions and air pollution through increased electric vehicle

(EV) adoption. With plans to achieve 80% electrification of

2wheelers by 2030, the move aims to reduce reliance on fossil fuels. Responding to the growing demand for EVs, the automobile industry has shifted its focus, also prompting the Company to introduce new tyre platforms like EnergyDrive for passenger cars, EnergyRide for twowheelers and WinEnergy for truck radials.

The FY 202526 Union Budget accelerates Indias EV agenda by enhancing funding for Auto PLI, PM EDRIVE and SMEC/SPMEPCI schemes, offering incentives and customs exemptions to foster local lithiumion cell production and prioritising EV charging and batteryrecycling infrastructure.

The Indian automotive industry is shifting towards premium models in both twowheeler and fourwheeler segments, driven by consumer demand for advanced features, superior technology and enhanced performance. Companies are responding by expanding their offerings, particularly in super sport, sport biking and adventure segments for twowheelers and luxury and SUV segments for fourwheelers.

The Company is focusing on expanding its product range, particularly in the specialty and offhighway segments and targeting premium car brands. By developing advanced tyre technologies such as ZRrated, CALM, and RunFlat tyres, the Company aims to boost its share in the highperformance luxury vehicle market. Additionally, it launched SPORTRAD and CROSSRAD steel radial tyres for highperformance motorcycles, capitalising on the growing adventure biking trend. These initiatives align with the Companys strategy to strengthen its position in the premium and twowheeler tyre markets, driving higher margins and customer satisfaction through superior technology and performance.

Internationalisation is fuelling growth in the automobile and tyre sectors, as companies expand globally, strengthen supply chainsthroughlocalisationanddiversified sourcing and adopt international standards for quality, safety and sustainability. Additionally, they are setting up research centres worldwide to innovate and tailor products to local markets. The Companys international business strategy includes targeting premium markets in the EU, Middle East and LATAM. The Company has been working on obtaining OEM approvals from international brands. During FY 202425, it witnessed an increase in demand and recorded an increase in sales in Middle East, Latin American and European countries. The Company intends to increase its global market penetration and increase share of exports to about onefourth of its total revenues.

The Company is driving a digital transformation to improve manufacturing efficiency and customer experience. In partnership with AWS, it has created smart factories and intelligent tyres with telemetry sensors to monitor pressure and temperature, predicting failures and reducing downtime. The adoption of SAP S/4HANA ERP on AWS enables realtime analytics for better decisionmaking in sales and consumer experience. Digital initiatives like IoTenabled controls and operator touchpoint digitisation have significantly reduced cycle times, scrap and energy consumption, solidifying Companys leadership in digital manufacturing.

The auto component industry, including the tyre sector, is progressing towards greater sustainability by addressing climaterelated risks and enhancing supply chain resilience. Companies are actively working to reduce emissions, conserve water and adopt circular economy practices. Within the tyre industry, sustainability efforts span the entire product lifecycle – from responsible sourcing to endoflife disposal, leading to use of recycled material into making new tyres – focusing on fuel efficiency, low rolling resistance, noise reduction and safety. The Company continues to invest in workforce upskilling and waste minimisation through advanced technologies. As a member of the GPSNR, the Company is committed to reducing material sourcing from deforested or degraded forest areas, aligning readiness with the EUDR.

In FY 202425, the global tyre industry saw strong growth. China leads with nearly 50% market share, but India is emerging as the thirdlargest market, driven by domestic demand and export growth. The global market is expected to grow from $200.97 billion in CY 2024 to $211.22 billion in CY 2025.

The Indian tyre industry is set for strong growth in FY26, driven by robust demand in the replacement market and a recovering OE segment. Passenger vehicle tyre demand is expected to grow by 68%, following a 57% increase this year, with key players expanding capacity. Challenges include volatile raw material costs and import reliance, while the market remains competitive. On a positive note, tyre exports are rising, strengthening Indias global market presence.

Indian tyres are exported to over 170 countries, with the United States, Brazil, Germany, the UAE, France and Italy as key markets.

While domestic demand remains solid, driven by stable replacement markets, export growth might be tempered by difficulties in major markets.

The Company is expanding capacities to meet rising demand, particularly in passenger car and truck and bus radial tyres. The Company successfully commissioned its plant to produce Truck and Bus Radial (TBR) in September 2024 with initial capacity of 1,500 tyres/per day. At the Chennai plant, TBR production will increase by 2,000 units per day by end of FY 202526, while Passenger Car Radial (PCR) production will grow by 3040%. The Nagpur plant will expand its capacity by 30%, with a Rs. 500 Crores investment. The Ambernath plant is also undergoing expansion to support exportdriven growth. These expansions are designed to meet the growing demand in passenger, commercial vehicle and farm retail tyre segments and strengthen the Companys presence in domestic and international markets, aligning with its strategy to capture increasing demand.

East, Brazil, Latin America, SouthEast Asia and Europe, with demand stabilising in SAARC countries. The Company focused on meeting PCR demand in Europe, with quality and performance, gaining global customer endorsements. In the US market, it developed product capabilities and manpower to launch the AgriRadial category. The Company believes that it is wellpositioned to continue international growth in FY 202526. The acquisition of compact construction tyres and tracks business includes CAMSO brand from Michelin.

R&D continues to be a key driver of growth, with a focus on digital innovation and ecofriendly tyre designs guided by a fiveyear roadmap. In FY 202425, the Company introduced new products such as Secura Lyfe and Milaze X5, expanded its presence in the EU truck and US TBR markets and enhanced existing offerings. Innovation efforts are further supported by institutional collaborations and the use of Generative AI, underpinned by a portfolio of 191 patents. Investments in advanced testing and failure simulation technologies have strengthened product quality, safety and sustainability, reinforcing the Companys industry leadership. For more information, please refer to the Intellectual Capital section.

The Companys Quality Assurance ensures excellence from sourcing to customer satisfaction. The Quality Council handles complaints, aligns QA goals and focuses on customercentric products. Key actions include identifying customer needs, preventing complaints and maintaining companywide QA alignment. Using tools like zerodefect workstations and audits, the Company exceeds standards, collects customer feedback, benchmarks performance and continuously innovates to keep most products bestinclass.

The Company has a robust risk management system designed to address current and future challenges, safeguarding longterm objectives. Its Business Continuity and Data Recovery plans ensure comprehensive risk mitigation

Risk Management Approach across all business areas. Through continuous monitoring and proactive strategies, the Company effectively manages risks, including commodity price fluctuations, foreign currency explosure, cybersecurity threats, geopolitical disruptions and ESGrelated challenges. Regular scenario planning helps anticipate potential risks and market trends. Committed to regulatory compliance and global best practices, the Companys risk management strategy is supervised by the Risk Management Committee, which also oversees effective mitigation strategies.

The Company is dedicated to ensuring a safe, healthy work environment by preventing occupational injuries and aiming for an incidentfree workplace. It follows a proactive, systematic approach to build a strong safety culture, ensuring compliance with all EHS regulations and continuously improving through best practices.

The Company aims for ‘zero incidents and follows an integrated safety approach, combining ISO 45001 and the British Safety Councils Five Star Framework. All manufacturing units are ISO 45001:2018 certified. Employees, including contractors, receive extensive training in BehaviourBased Safety and Risk Assessment to foster a strong safety culture. During the reporting period, 10,194 mandays of health and safety training were conducted. Regular safety reviews include daily Gemba walks by plant leaders and monthly, quarterly and central committee meetings to address safety issues.

Employee health and wellbeing is prioritised by way of a comprehensive program that includes worklife balance, rehabilitation, annual health checks and mental health support. All plants have 24/7 Occupational Health Centres with medical staff and ambulances. Health risks, including psychosocial hazards, are identified through regular workplace monitoring and addressed with engineering controls. Awareness programs are held and 15% of the employees are certified firstaiders.

The Company is aiming for netzero emissions by 2050 through absolute emissions reduction, energy efficiency, clean energy adoption and advanced manufacturing technologies. Climaterelated risks and opportunities are managed through a strong ESG framework, guided by the Boards SCSR Committee and ESG Council. The focus on community development encompasses initiatives in education, employability and social welfare.

The Company promotes a culture of openness through progressive people policies and strong leadership commitment. In FY 202425, it advanced inclusion, talent acquisition and capability building, with the EmpowHER program boosting gender diversity and earning external recognition. AIdriven hiring improved recruitment efficiency, while structured training enhanced leadership and technical skills. Looking ahead, the Company plans to scale digital HR platforms and predictive analytics to support growth and improve employee experience. Further details are set out in the BRSR forming part of this Integrated Annual Report.

The internal control system is aligned with operational complexity to ensure efficient operations, asset security, fraud prevention, accurate reporting and regulatory compliance through automated SAP controls and a GRC framework.

Its threetier defence model includes:

1. First Line – Management Control: Line managers implement controls based on policies like the Code of Conduct, Whistleblower Policy and SOPs.

2. Second Line – Oversight: Regular reviews through ExCom, OpCom and functional Operation Reviews ensure performance and compliance.

3. Third Line – Independent Assurance: Oversight by the Board, Audit Committee, Risk Management Committee, and Sustainability & CSR Committee, supported by various internal and external audits.

This layered approach ensures strong governance and risk management across the organisation.

In compliance with the Listing Regulations, this report highlights key financialratios that have changed significantly compared to the previous fiscal year along with an analysis for such change is provided in the financial discussion section.

This document contains certain information and statements which are forwardlooking in nature, interalia, regarding Companys objectives, plans, estimates and expectations etc. By their nature, forwardlooking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. Therefore, the actual results may differ significantly due to factors such as economic conditions, industry demand and supply, input price changes, government regulations, tax laws, litigations and industrial relations. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to, interalia in the Managements Discussion and Analysis Report herein.