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In the next three years, domestic tyre demand is likely to witness happier times with the expected volume growth of 6-7%. The surge will be backed by the increased demand in the rural centric two wheeler and tractors segments together with enhanced commercial vehicles sales. As per the Investment Information and Credit Rating Agency of India (ICRA), the positive vibe comes as a result of estimated 9% revenue growth (as per Monsoon projection) and 6-7% volume growth in the ongoing financial year. Yet, there has been no reports of capacity addition by the manufacturers which is said to be attributed by the rising import of the cheaper Chinese tyres, coupled with vague price trends.
Past 5-6 years have observed the capacity increase worth Rs 35,000 crore in the Truck and Bus Radial (TBR) segment and if the Chinese influx amplifies further, this segment will get affected the most, a senior official from ICRA Ratings reported. Last financial year saw the fall of 6-8% in realisations, which led to the dip of 2% revenues in the local tyre industry, courtesy increased Chinese imports. However, the volume growth of 4-5% was noticed.
Earlier this year, the industry enjoyed lower input costs due to fall in the natural rubber prices by 15% that lead to a huge 470 bps of operating margin expansion to 19.1%.
Good to know: Coming three years will see tyre sales shoot, especially in the two wheeler and tractor tyres segments, thanks to the revived rural approach by the leading original equipment manufacturers (OEMs) of the country.
