15% growth forecast for tyre industry: ICRA

After two years of contraction, the Indian tyre industry's demand is poised to grow by 13-15 per cent in the original equipment manufacturer (OEM) segment and seven-nine per cent in the replacement market segment this fiscal, according to ratings agency ICRA. Stating that capex executions have resumed in the last few months after a hiatus with improving domestic and exports demand, ICRA said based on projected demand growth, capital expenditure of over Rs 20,000 crore is expected in the tyre industry between FY2022 and FY2025, which would be partly debt funded.

The demand outlook of the tyre industry remains favourable and growth in the ongoing fiscal will be aided by a sharp recovery in OEM tyre demand, lower base effect of FY2021, improving pace of vaccination, continued preference for personal mobility and healthy rural cash flows amid a normal monsoon forecast, the ratings agency said in a statement. "Tyre demand has been relatively more resilient compared to other auto components as the replacement demand in the tyre industry insulates it from cyclicality to a large extent," ICRA Vice President and Co-Group Head Srikumar Krishnamurthy said.

Vehicle production had fallen by around 13-15 per cent in the last two years, ending FY2021 on account of weak consumer sentiments and subdued economic activities while domestic tyre demand contracted by around eight per cent, he added.