Domestic tyres industry likely to grow 6-8% in FY24: ICRA

Chennai, Apr 29 (KNN) The domestic tyre sales are expected to grow 6 to 8 percent in FY24, according to a report by ICRA.

According to the report, domestic tyre sales are likely to grow due to replacement demand and momentum in the OEM segment. 

Demand momentum in the OEM segment will continue in FY2024 with an estimated growth of 8 to 10 per cent while replacement demand, which forms around two-thirds of tyre demand, is likely to witness “mid-single digit growth” in FY2024, the report said.

“Factors like improving economic activities, increasing freight movement, higher spend on infrastructure, absence of material price hikes shall support the growth in the replacement segment in FY2024,” it said.

ICRA pointed out that the tyre industry has been investing around 10 per cent of its revenues in capacity expansion over the past few years.

 “It will continue to invest around 10 to 12 per cent of the revenues in the medium term. This capex spend will be on the back of healthy demand,” it added.

Nithya Debbadi, assistant VP and sector head, ICRA, said: “ICRA projects 7-9 per cent growth in industry revenues for FY2024 with domestic growth outpacing exports.”

“Segment-wise, commercial vehicles shall benefit from the increasing traction in the infrastructure and construction segments. Strong underlying demand and preference for personal mobility will continue to drive passenger vehicles and aid in a recovery in the two-wheeler segments,” he said.

He added that nevertheless, tyre demand remains vulnerable to potential headwinds like adverse monsoons and its impact on rural demand, supply-related issues, general inflation, and further hardening in financing rates.

According to ICRA, the tyre industry’s revenues grew by 15-17 per cent YoY in FY2023, supported by strong OE demand and better realisations even as replacement demand was affected by frequent prices hikes, higher interest rates and subdued rural demand in a few regions. 

Following strong growth in FY2022, however, tyre exports have been gradually declining in the last two quarters amid economic slowdown and inflationary pressures in key markets like the US and the EU.  (KNN Bureau)