TRENDING TOWARDS PROSPERITY

The tyre sector is set for strong, sustained growth with stable raw material costs and pricing discipline boosting near-term prospects

The tyre sector has been performing exceptionally well in recent weeks, surpassing the benchmark stock indices. This rally can be attributed to several factors, including an improvement in sentiment within the automobile sector and an increase in export demand, supported by a stable outlook for raw materials. Consequently, the medium- to long-term outlook for the tyre industry appears to be bright.

According to a report jointly released by the Automotive Tyre Manufacturers’ Association (ATMA) and CRISIL Market Intelligence & Analytics (MI&A) Consulting, the Indian tyre industry is on course to more than double its revenue to US $22 billion by fiscal year FY31-32 from US $9 billion in FY21-22.

This positive long-term outlook for the sector can be attributed to several key factors. Firstly, there is a rising demand for new vehicles, which will drive the need for more tyres. Also, the government’s focus on infrastructure development will further contribute to the growth of the industry. Furthermore, replacement demand will continue to be a crucial supporting factor for the sector, as a considerable number of vehicles continue to age each year.

The Indian tyre industry primarily caters to two segments, namely tyres for new vehicles fitted at the factory gates of original equipment manufacturers (OEMs), and replacement demand by older vehicles. Out of the total demand, approximately 60% is attributed to the replacement of old tyres with new ones, while 28% is consumed by original equipment manufacturers (OEMs), typically in the auto sector. The remaining portion is accounted for by export demand.