Tyre Industry Poised for 7-8% Growth This Fiscal Year

18 Nov 2024 , 02:26 PM

Crisil Ratings, a ratings firm, stated on Monday that a 3–4% increase in volume and realisations would propel a 7-8 percent topline growth for tyre manufacturers this fiscal year.

After recording a compound annual growth rate of 21% between fiscals 2021 and 2023, the tyre manufacturer’s expected revenue growth will be in the single digits for the second year in a row, albeit roughly double that of the previous fiscal year, according to Crisil Ratings.

Additionally, it stated that because businesses are progressively raising prices to counteract the spike in the price of natural rubber, realisation growth will be spread out across the fiscal year.

Meanwhile, replacement demand will fuel volume growth, according to Crisil Ratings, which also noted that the analysis is predicated on the performance of the top six tyre manufacturers, who generate about 87% of the industry’s revenue.

The ratings agency estimates that while cash flow will still be significant despite being somewhat impacted, operating profitability for businesses will decline by about 300 basis points as a result of the high cost of natural rubber and the restricted capacity to pass these costs on due to modest volume increase.

About 75% of the industry’s sales (measured in tonnes) come from domestic demand, with the remainder coming from exports. The replacement market accounts for around two-thirds of domestic demand, with original equipment manufacturers (OEMs) providing the remaining portion, according to Anuj Sethi, Senior Director, Crisil Ratings, who talked to ET.

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