Domestic tyre sale volumes will see moderate growth of 4-6%
Revenues are likely to expand by 5-7% this fiscal, high natural rubber prices and increasing crude prices are likely to moderate: Icra
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Domestic tyre sale volumes are expected to see a moderate growth of 4-6 per cent this fiscal after witnessing an estimated pace of 6-8 per cent in the previous financial year, ratings agency Icra said on Thursday.
This growth in the last fiscal was driven by factors such as elevated base and subdued growth in the commercial vehicle (CV) segment, it said. However, Icra anticipates domestic demand from original equipment manufacturers (OEMs) in certain consumer segments like PV (passenger vehicle) and two-wheeler as well as for replacement to remain healthy, supporting overall tyre volume expansion in FY25.
While revenues are likely to expand by 5-7 per cent this fiscal, high natural rubber prices and increasing crude prices are likely to moderate the tyre industry’s margins by 200-300 basis points (bps) in FY25, Icra said. The rating agency also said it expects the replacement market, which contributes to over two-thirds of the industry volumes, to remain stable, aided by healthy demand across the segments.
Tyre export volumes, which contribute approximately 25 per cent of industry’s sales (by value), are estimated to have recorded a low single-digit growth in FY24 after contracting by around 7 per cent in FY23, owing to demand shrinkage in key markets amid inflationary pressure and higher interest rates, it said.
“Tyre exports are expected to remain moderate in the near term because of muted demand growth in key export destinations, namely the US and Europe,” said Nithya Debbadi, Assistant Vice President and sector head at Icra. Further, she said supply chain issues arising from the Red Sea crisis have raised freight costs (resulting in increased cost of tyre) and elongated transit times. In terms of domestic factors, despite an elevated base, consumer segments are expected to record a mid-single digit growth (PV at 4-6 per cent and two-wheeler at 5-7 per cent), on the back of healthy underlying demand.
“However, growth in the CV segment is expected to be impacted by the brief pause in infrastructure activities because of the parliamentary elections, with the model code of conduct, which is in force because of the Parliamentary elections, and the impact of high base,” she said. Tractor demand growth, according, to her, is expected to be supported by the forecast of above normal monsoons, aiding rural cash flows.
