Inside JK Tyre’s Growth Bet

JK Tyre and Industries Ltd is entering another investment cycle after running into a constraint manufacturers usually welcome: demand in parts of the business has been greater than the capacity available to serve it.

Over the past two years, the tyre maker says it had export orders it could not fully service as it chose to protect its position in India. That constraint now sits behind a ₹4,980-crore brownfield expansion in passenger-car radial (PCR) and truck and bus radial (TBR) capacity, on top of ₹1,130 crore of projects already under implementation.

The ₹4,980-crore programme, to be executed in phases through 2029, is expected to increase combined PCR and TBR capacity by about 24%.

“In the last two years, we have lost some export orders… because we did not have sufficient capacity,” Chief Financial Officer Sanjeev Aggarwal said.

When capacity became scarce, JK Tyre chose India. “Our stakes in India are very high,” Managing Director Anshuman Singhania told Autocar Professional. “We don't want to lose any of that market because gaining that market share again is very difficult. We want to ensure that our India presence is not diluted.”

But JK Tyre is not looking to only make more tyres as fresh capacity comes on stream. It is also trying to change the mix of what it sells by focusing on larger-rim and higher-performance passenger tyres, expanding exports and building services that generate revenue throughout a tyre’s operating life. 

That shift comes at a difficult point in the commodity cycle. Raw materials account for about 67% of JK Tyre's costs, according to management, and price increases have yet to fully catch up with the recent rise in input costs. The next capacity cycle therefore has to do more than lift volumes. It also has to improve realisations and the returns generated from the additional capacity.

More Capacity, Better Mix

Passenger-car tyres provide the clearest indication of where JK Tyre wants the mix to move.

“Our winning story is premiumisation,” Singhania said. “In passenger cars, we classify 16-inch and above as premium tyres. That segment was around 19% of our passenger-car radial mix in FY19 and is around 30% today.”

The company has a longer-term aspiration of taking its domestic premium PCR mix to around 40%. Its product push includes larger rim sizes, Levitas ultra-high-performance tyres, Puncture Guard and connected tyres.

The new capacity is intended to give JK Tyre more room to pursue that shift. “We have travelled quite a bit on premiumisation, and we are pushing this much more strongly as new capacities come in,” Singhania said. “We are increasing our capability to serve the market and participate more actively in premium tyres, not only in replacement but also with OEMs.”

For JK Tyre, premiumisation is not simply about selling a more expensive tyre. Larger rim sizes, ultra-high-performance products and EV applications allow it to participate in parts of the passenger-vehicle market where product specifications are becoming more demanding and realisations can potentially be higher.

The shift in India's vehicle mix towards SUVs and larger wheels supports that strategy. Electrification adds another set of requirements.

JK Tyre does not need dedicated manufacturing lines for EV tyres, Singhania said, but the tyre itself has to change. “EVs are heavier, require better rolling resistance, and low noise is very important, whether it is a passenger car, truck or two- and three-wheeler,” he said.

The company supplies tyres across electric passenger vehicles, buses and two- and three-wheelers. Aggarwal claimed JK Tyre supplies close to 70% of India's electric-bus tyre requirement.

The move towards higher-value tyres is also increasing the importance of product development.

“Our backbone has always been R&D, and we have believed in giving the market innovative products,” Singhania said. “We spend close to 1.5% (of revenue) on R&D every year and have about 250 scientists and engineers at our Mysuru R&D facility.”

He pointed to Puncture Guard, Levitas and tyres with embedded sensors as examples of the company's product development.

The financial case for improving the mix has become more relevant as input costs have risen. Singhania said JK Tyre has taken price increases but has yet to completely recover the rise in raw-material costs.

“We have taken about 12.5% price increase. There is still an 8-9% gap that we will look to offset as we move through the second half,” he said. “In the replacement market, we are increasing prices in a staggered manner, while OEM pricing is index-based and comes with a lag. Overall, price increases are inevitable.”

The company had already warned in its May earnings call that its raw-material basket could increase 18-20% sequentially in Q1 FY27 because of the West Asia crisis and a weaker rupee. It had at the time taken price increases of 4-5% in the replacement market and 5-7% in exports, with further increases under way.

A richer mix can support better realisations, but it cannot fully protect a tyre manufacturer from a sharp commodity cycle. Pricing, sourcing and cost control therefore remain important alongside premiumisation.

JK Tyre has also changed parts of its sourcing strategy in response to geopolitical disruption. “We have swiftly shifted some sourcing from Europe and the Middle East towards the eastern side of the world,” Singhania said. “We have also accelerated alternate approvals for raw-material suppliers and introduced substitutions wherever technically possible.”

Where the New Capacity Goes

The ₹4,980-crore programme effectively has two jobs: create room for domestic growth, and restore headroom for exports.

“With the new capacities, we will not only restore those export volumes, but also increase them in both truck radials and passenger-car tyres,” Singhania said. “We have developed a host of new passenger-car products for Europe.”

In FY26, the company’s passenger-tyre exports had grown 20%, while total export volumes increased 5%, according to the company's May earnings call.

The export opportunity also illustrates the cost of running with little spare capacity. Every tyre allocated to an overseas customer competes with domestic replacement and OE demand, where JK Tyre has chosen to protect its existing position. Additional capacity removes some of that trade-off.

Until the larger projects arrive, the company is trying to extract more from its existing factories. “We are working a lot with our plants on increasing productivity and bringing in digital inputs that are helping improve efficiency and unlock capacity,” Singhania said.

The former Cavendish operations are one example. Aggarwal said output has increased from around 150 tonnes a day when JK Tyre acquired the business in 2016 to roughly 650 tonnes a day. Singhania said those plants now form an important manufacturing base for truck radial tyres and OEM supplies.

Internationally, JK Tornel in Mexico provides another manufacturing base. Singhania said the company is trying to improve throughput there while widening the product portfolio and distribution.

“We have developed a lot of higher rim sizes in passenger cars there,” he said. “The effort is around productivity enhancement, expanding the dealer network and introducing new products.”

The company’s capacity expansion will require additional borrowing as well. Aggarwal said JK Tyre's debt-to-EBITDA ratio had fallen from above three times around four years ago to roughly two times. Funding for the ₹1,130-crore project has already been tied up, while financing for the ₹4,980-crore programme is being arranged.

“We will raise some amount of debt for these projects over the next three to four years, so it is not going to increase immediately,” he said. “Funding for the ₹1,130-crore project has already been tied up, while we are in the process of tying up funding for the ₹4,980-crore programme.”

Management expects earnings growth to prevent leverage from increasing materially as the projects are funded. “This will not increase our overall leverage ratios significantly because profitability will also improve over the next two to three years,” Aggarwal said.

That assumption matters because the expansion is being undertaken while raw-material inflation is putting pressure on profitability. If margins take longer to recover, the investment cycle could put greater pressure on the balance sheet than management currently expects.

The returns from the capex will therefore depend on more than utilisation. JK Tyre will also need the additional capacity to produce a better mix and reopen markets that it has been unable to fully serve.

Beyond the Tyre

The more structural change in JK Tyre's business may be happening after the tyre leaves the factory.

The company already supplies tyre-pressure-monitoring systems and embedded sensors. The technology began with passenger vehicles and is moving into commercial tyres, while farm and off-highway applications could follow.

“We started with TPMS kits and have now graduated to embedded sensors,” Singhania said. “The journey started with passenger cars, and we are already taking it into commercial tyres. Farm and OTR tyres could follow.”

The technology is also being used as part of JK Tyre's fleet-management business.

JK Tyre says it serves about 1,500 fleets directly or through dealers, out of a base of roughly 1,800 fleets. Around 70 of these are large fleets with more than 1,000 vehicles each, where the company offers mobility solutions on a cost-per-kilometre basis. 

“We call it a mobility solution where we charge the customer on a cost-per-kilometre basis,” Singhania said. “They are not paying for the full asset; they are paying per use. We take responsibility for the fleet and commit to delivering a certain kilometre life from the tyres.”

The model shifts part of the commercial relationship from a one-time product sale towards an ongoing service contract. It also gives JK Tyre data on how tyres perform in real-world conditions.

“We are seeing good results in monitoring tyre life and improving it,” Singhania said. “The feedback goes back to our R&D teams to improve the products as well. We are using technology to expand the entire mobility offering around the tyre.”

The company identifies fleet solutions, tyre management and the cost-per-kilometre model among the adjacent businesses that it has been scaling.

What remains unclear is how meaningful the business can become financially. JK Tyre does not separately disclose revenue or margins from mobility services.

For now, its importance lies in extending the relationship with fleet customers, collecting operating data and giving the company another way to differentiate itself beyond the physical tyre.

The same question of whether technology can translate into commercial value applies to JK Tyre's sustainable-material work. 

The company has developed a tyre using up to 80% sustainable materials, including renewable, recyclable and reusable inputs. Management says it has already been road-tested and is being sold in the aftermarket.

The hurdle is cost. “Today we are selling it in the aftermarket, but it is an expensive product,” Singhania said. “We are in active discussions with OEMs, but we need to find the right balance in terms of economics.”

Aggarwal said wider OEM adoption could take longer. “Once mass production comes in, it should pick up pace,” he said. “But mass production and OEM acceptance will take some time because of the higher price of the product.”

The commercial test is similar across much of the company's technology portfolio. Embedded sensors, EV products and sustainable materials ultimately need to command a better realisation, reduce customers' operating costs or strengthen the relationship enough to justify the additional investment.

JK Tyre has already established that it needs more capacity. Its plants are tight enough for some export demand to have gone unserved, while India remains the first priority. The harder question is what happens once that constraint eases.

The return on the ₹4,980-crore programme will depend not only on how many additional tyres JK Tyre sells, but on where they are sold and what sits around them: larger-rim products, exports, connected services and fleet contracts. That will determine whether the next expansion cycle simply makes JK Tyre bigger, or changes the economics of the business as well.