Independent and professional investment information and credit rating agency ICRA has said that it expects the domestic tyre demand to report a 6-7 % volume growth over the next three years. ICRA said this demand will be supported by revival in automotive OEM demand, especially rural-centric two-wheeler and tractor segments due to pick up in rural expenditure with good monsoon.
ICRA noted that domestic tyre makers have invested significantly in new capacities for truck and bus radial and two-wheeler segments over the last several years. As a result the industry witnessed the completion of investments worth over Rs 20,000 crore, between FY2010 and FY2016, it added. However, increasing influx of cheaper Chinese tyres and uncertain input price trends has made the industry look at consolidating operations and optimally utilising recently-installed capacities. The agency also noted that projects worth over Rs 8,000 crore are expected to be completed over the next 12 months, helping tyre manufacturers prepare to meet the likely rise in demand.
Subrata Ray, Senior Gr Vice-President, ICRA Ratings, said the truck and bus radial segment has seen Rs 35,000 crore worth capacities over the last five to six years. He added that this segment may get impacted if imports from China increases further. While industry-wide revenues are expected to grow by 9 % during FY2017, supported by around 6-7 % growth in volumes, operating margins are expected to contract by 250-300 bps, noted Ray.