CEAT Plans Another Price Hike in August as Input Costs Rise: CFO

CEAT is likely to raise tyre prices again in August as the company expects raw-material costs to increase by another 6-7% sequentially during the second quarter of FY27, Chief Financial Officer Kumar Subbiah said.

The tyre maker has already implemented price increases from July 1 and has announced further hikes during the second half of the month. The proposed August increase will follow cumulative price hikes of around 5% taken until the end of the June quarter.

“We expect raw-material costs to further go up in the second quarter in the range of about 6% to 7%,” Subbiah said. “Effective July 1, we took one more increase. In the second half of July also, on different dates, we announced price increases, and we are likely to have one more increase in August.”

CEAT will decide on further pricing action after assessing commodity prices and the market’s response to the latest increases, he added.

The company’s raw-material costs rose around 20% sequentially in Q1 FY27, according to Subbiah. Although CEAT increased prices during the quarter, the hikes were not enough to fully recover the rise in costs.

“There is a lag in terms of passing on the impact of raw-material costs,” he said.

Natural rubber at over 15-year high

Subbiah said domestic natural-rubber prices had climbed to around ₹280 per kg, their highest level in more than 15 years. Crude oil was trading at around $85 a barrel, while the rupee had depreciated by around 5-7% over the preceding three to four months, adding to the cost of imported inputs.

Tyre makers use natural rubber as well as crude-linked materials such as synthetic rubber and carbon black. The increase in these costs has put pressure on industry margins.

Subbiah said the scale of the inflation was too large for CEAT or other tyre makers to absorb.

“It is not about pricing power. It is about the inability to absorb this kind of cost increase,” he said. “This cost increase will be there for every player in the world. Therefore, the input cost will be passed on, but maybe with a lag.”

Margins fall sharply in Q1

CEAT’s standalone operating margin declined to 9.13% in Q1 FY27 from 14.55% in the March quarter and 11.11% a year earlier.

Its standalone revenue rose 18% year-on-year to ₹4,163 crore, but net profit fell to ₹98 crore from ₹135 crore. The cost of materials consumed rose to ₹2,880 crore from ₹2,385 crore in the preceding quarter and ₹2,239 crore a year earlier.

On a consolidated basis, revenue increased 22% year-on-year to ₹4,318 crore, while the operating margin fell to 8.56%. Net profit declined to ₹4 crore from ₹112 crore in the year-ago period.

CEAT said the continuing West Asia crisis has led to significant raw-material inflation. The company expects costs to remain elevated in Q2 and plans to balance pricing action with cost controls.

“Commodity cost inflation due to the West Asia war had a significant impact on our raw-material costs, leading to a drop in our Q1 margins,” Subbiah said.

Price recovery remains delayed

CEAT had warned in April that raw-material costs could increase by more than 15% during Q1 and potentially move closer to 20% by the end of the quarter.

During its Q4 FY26 earnings call, the company had said price increases were necessary because only a small part of the cost increase could be managed through internal savings. It had estimated that replacement-market prices needed to rise by around 10% over March levels.

About half of this increase had been taken between March and April, with the balance planned in stages through May and June. However, CEAT’s Q1 release said cumulative price increases stood at 5%, indicating that the recovery continued to trail the rise in input costs.

The recovery period also differs across channels. Price revisions in the original-equipment business are generally linked to input-cost indices and take effect with a lag. In the replacement market, companies can change prices more directly but must consider competition and customer demand. International price increases also take time to reflect in revenue because of existing orders and shipping lead times.