Domestic demand for tyres set to increase by 7-9% this fiscal: ICRA

Domestic demand for tyres is estimated to grow 7-9 per cent in 2022-23 fiscal year, however, the rise in input prices is expected to keep industry margins under pressure, ratings agency ICRA has said. The rise in domestic demand has been projected on factors such as gradual easing of supply related constraints, improvement in growth momentum in the commercial vehicle segment and stable replacement volumes.

Tyre industry revenues continue to breach record high levels thanks to growth in domestic demand and exports and increased realisations, ICRA Assistant Vice President and Sector Head Nithya Debbadi said. "While domestic demand was relatively subdued in Q3 FY2022, industry revenues grew by 12.5 per cent (year-on-year) supported by higher realisations," she added.

Tyre demand witnessed a recovery in FY22 with an estimated growth of 11-13 per cent after two years of contraction led by slowdown in the auto sector and Covid-19 pandemic. However, OE demand was affected by weak two-wheeler sales, lower passenger vehicles production due to supply-chain issues such as semiconductor chip shortages, and high base limiting growth in tractor demand, ICRA added.

The ratings agency further said that replacement demand was strong across product segments although there were headwinds in Q3 FY22 in commercial segments due to factors such as inflationary costs trends, weak rural sentiments and base effect. 

Commenting on tyre exports, the ratings agency said that there was a robust growth in FY22 supported by healthy demand from key export destinations such as the US and European nations. "ICRA expects prospects for tyre exports to remain favourable in the medium term given the increasing acceptance of Indian tyres in the international markets. Tyre imports continue to remain low, supported by favourable government regulations," it added.

(with inputs from PTI)