Hit by the slowdown in automobile sector, the tyre industry is witnessing subdued demand not only from OEM (original equipment manufacturers), but also from replacement market and exports.

However, the softening prices of key raw materials such as natural rubber and crude derivatives provide relief to the tyre makers. This will help them to protect their margins, said ICRA.

Subrata Ray, Senior Group Vice-President, ICRA, said while the short-term outlook of the tyre industry remains subdued in the wake of the demand slowdown in the automotive industry, the tyre makers’ margins have been cushioned by the softening of rubber prices and other crude derived inputs.

Slowdown in the domestic auto industry and the weak export outlook to the European Union region is likely to curb demand growth during the current fiscal. ICRA anticipates volume growth in the OEM segment to taper off to five per cent, while the replacement demand is estimated to grow by 5-7 per cent.

The recent hike of 1.5-2.5 per cent in tyre prices and weak rupee will boost realisation for tyre makers.

Despite contraction in OEM demand, ICRA expects a moderate revenue growth of 13-14 per cent in this fiscal on the back of modest replacement demand and export revenues.

Related Topics