According to Icra, the domestic tyre sale volumes are projected to experience a moderate growth rate of 4-6% in the current fiscal year, following a 6-8% growth rate in the previous financial year. The growth seen in the last fiscal year was influenced by factors such as a high base and subdued growth in the commercial vehicle segment, as reported by the ratings agency.
Icra anticipates that the domestic demand from original equipment manufacturers (OEMs) in specific consumer segments like passenger vehicles and two-wheelers, as well as in replacement markets, will remain robust, thereby supporting overall tyre volume expansion in FY25. Despite the expected revenue expansion of 5-7% in the current fiscal, Icra highlights that the industry's margins might face moderation due to high natural rubber prices and increasing crude prices, potentially decreasing margins by 200-300 basis points (bps) in FY25.
The rating agency also emphasized that the replacement market, accounting for over two-thirds of the industry volumes, is expected to remain stable, driven by healthy demand across various segments. In terms of tyre exports, which contribute around 25% of the industry's sales, Icra mentioned that they experienced low single-digit growth in FY24 after a contraction in FY23, attributed to demand shrinkage in key markets amidst inflationary pressures and higher interest rates.