Crisil: Production volumes of tyre manufacturers to halve

The production volumes at tyre manufacturing companies could halve to six to eight per cent this fiscal. Estimated to settle at 2.5 million tonnes, compared with 12-14 per cent last fiscal, the lower demand could be driven by the replacement, commercial vehicles and passenger vehicles segments besides demand from export markets. The moderation is expected to be a factor in the growth last fiscal benefitting disproportionately from the low-base effect of the preceding two fiscal. Back then, it was known that volumes had contracted due to an economic slowdown induced by the Covid-19 pandemic. Operating margins should rise to 12 per cent this fiscal, up 200 basis points (bps) from last fiscal’s decade low of 10 per cent as price hikes ease the pressure from high input costs. The credit profiles of tyre makers are expected to remain stable, good news for stakeholders. Better cash accruals should help fund higher Capital Expenditure (CapEx) and keep debt metric healthy, as per the Crisil analysis of India’s top six tyre manufacturers, accounting for 80 per cent of the Rs.75,000 crore revenue of the sector. The sector derives 60 per cent of its volume from the replacement market and 27 per cent from OEMs with export volumes making up the rest.