Tyre manufacturers’ margins seen dipping to 12% this fiscal as raw material costs surge: Crisil

India’s tyre manufacturers are likely to face a temporary profitability squeeze this fiscal as a sharp rise in raw material costs outpaces the pace of price increases, Crisil Ratings said in a report on August 24.

As per the ratings agency, operating margins of tyre makers are expected to moderate to around 12% from 14.2% last fiscal, before recovering to 13-13.5% next fiscal if input costs stabilise and higher prices fully flow through.

The pressure is being driven by a 35-40% increase in key inputs, led by natural rubber and crude-linked materials. Natural rubber prices rose to around ₹275 per kg in June 2026 from ₹220 per kg in fiscal 2026, amid unseasonal rainfall and uneven monsoons in Kerala and Southeast Asia that tightened supplies and contributed to a global deficit.

Natural rubber, crude-linked inputs drive cost squeeze

The West Asia conflict has compounded the pressure by raising costs of synthetic rubber, carbon black and nylon tyre cord, while shipping disruptions have further strained supply chains. Since natural rubber alone accounts for nearly half of the industry's raw material costs, the increase has materially widened the gap between input costs and tyre realisations.

“A sharp 35-40% rise in key inputs is likely to compress tyre makers’ operating margins by 200-250 basis points this fiscal, but this is a cost-pass-through lag rather than a structural profitability reset,” said Anuj Sethi, Senior Director, Crisil Ratings.

Crisil's analysis of the six largest tyre makers, accounting for around 85% of the industry's ₹1.36 lakh crore revenue last fiscal, indicates that demand should provide some cushion. Industry volumes are projected to grow 4-5% this fiscal, moderating from 7-8% last year. OEM and replacement demand are each expected to expand 4-5%, while exports may grow 3-4%.

₹18,000 crore capex planned as utilisation nears peak

The demand outlook is also prompting manufacturers to accelerate investments. Tyre makers are expected to spend around ₹18,000 crore over this fiscal and the next, nearly twice the expenditure of the preceding two fiscals.

“Sustained demand and peak utilisation has pulled forward the next investment cycle,” said Poonam Upadhyay, Director, Crisil Ratings.

Crisil expects phased commissioning and greater focus on higher-value radial tyres to limit overcapacity risks. Strong balance sheets and liquidity buffers should also allow companies to fund expansion through a mix of debt and internal accruals without materially weakening credit profiles.

The key risks remain the trajectory of raw material prices, the pace of cost pass-through and demand resilience across replacement and OEM markets.