Domestic tyre demand to rise 7-9% in FY23, says ICRA

Domestic tyre demand is expected to grow by 7-9% in FY2023 helped by recovery in original equipment (OE) across most product segments and steady growth in replacement volumes, said rating agency ICRA.

Some of the reasons for this growth estimates are gradual easing of supply related constraints in passenger vehicle OE segment, improving growth momentum in Commercial Vehicle OE segment and stable replacement volumes. Tyre demand witnessed a recovery in FY2022 with an estimated growth of 11-13% year-on-year.

“Tyre industry revenues (consolidated for ICRA’s sample of tyre manufacturers) continue to breach record high levels supported by growth in domestic demand and exports and increased realisations,” said Nithya Debbadi, Assistant Vice President and Sector Head, ICRA.

Debbadi noted that although domestic demand was relatively subdued in Q3 FY2022, industry revenues grew by 12.5% YoY supported by higher realisations.

Meanwhile, tyre exports registered a robust growth in FY2022 supported by healthy demand from key export destinations such as the US and European nations.

ICRA’s forecast for tyre exports remain favourable in the medium term given the increasing acceptance of Indian tyres in the international markets and tyre imports will remain low, supported by favourable Government regulations.

ICRA expects the industry to continue to invest about 10-12% of the revenues in the medium term. While part of the capital expenditure shall be debt-funded, credit profiles of tyre manufacturers would be supported by healthy earnings and cash reserves.