CEAT plans to invest around ₹1,205 crore to expand its two-wheeler tyre manufacturing capacity by about 66% as the existing capacity at its Nagpur plant nears full utilisation.
The tyre maker will add around 53,000 tyres a day in phases by the end of FY31. CEAT currently has capacity to produce about 80,000 two-wheeler tyres a day, excluding other capacity additions already under implementation. The latest project will take its total capacity to around 1.33 lakh tyres a day.
The company’s board approved the investment on Thursday. The project will be funded through a combination of internal accruals and debt, CEAT said in a stock-exchange filing.
Its existing two-wheeler tyre capacity is operating at around 95%. The company said it may add the proposed capacity through greenfield or brownfield expansion, based on an internal assessment. It has not yet disclosed the location of the project or the investment planned for each phase.
“The existing production capacity for two-wheeler tyres at the company’s Nagpur plant is nearing full utilisation,” CEAT said. The expansion is part of its proactive capacity planning to support future growth opportunities.
The proposed capacity addition is equivalent to about two-thirds of CEAT’s current two-wheeler tyre capacity. However, the company has not disclosed how the new output will be divided among original equipment manufacturers, the replacement market and exports.
Strong Demand, High Utilisation
The expansion comes after strong growth in CEAT’s two-wheeler tyre business. During its Q4 FY26 earnings call in April, the company said two-wheeler replacement sales had grown in the mid-20s during the March quarter, while demand had moved above pre-Covid levels.
CEAT had also said capacity utilisation across product categories was in the 85-90% range, with planned utilisation at more than 90%. High utilisation had prompted the company to accelerate capacity additions during the closing months of FY26.
The company is also increasing its presence in electric two-wheelers. CEAT said during the Q4 earnings call that it had an estimated 18% share of the domestic electric two-wheeler original-equipment tyre market and was participating in several upcoming vehicle launches.
CEAT did not say whether the new capacity will be dedicated to conventional two-wheelers, electric scooters, premium motorcycles or a mix of these categories.
₹300 Crore Spent in Q1
CEAT spent around ₹300 crore on capital expenditure during the first quarter of FY27, largely to increase capacity and support its business plan.
“We stayed invested on our capex to the tune of ₹300 crore, largely to enhance our capacities,” Chief Financial Officer Kumar Subbiah said. The company was also keeping a tight control on discretionary expenses and routine capital expenditure to conserve cash, he added.
At its Q4 FY26 earnings call, CEAT had indicated an overall FY27 capital expenditure requirement of around ₹1,300-1,400 crore, covering growth and routine investments. It had said spending would be reviewed every quarter based on demand and the operating environment.
The company has not clarified how much of the newly approved ₹1,205-crore two-wheeler project will be spent during FY27. Since the capacity is to be added progressively through FY31, the investment will be spread over several years.
Investment Despite Margin Pressure
The expansion was announced alongside CEAT’s Q1 FY27 results. Consolidated revenue rose 22% year-on-year to ₹4,318 crore, supported by healthy demand across segments and high capacity utilisation.
However, the EBITDA margin fell to 8.56%, from 10.94% a year earlier, while net profit declined to ₹4 crore from ₹112 crore. The company attributed the margin pressure mainly to a sharp increase in raw-material costs following the West Asia crisis.
On a standalone basis, revenue rose 18% to ₹4,163 crore, while net profit fell to ₹98 crore from ₹135 crore. CEAT has taken cumulative price increases of 5% to partly offset cost inflation and expects raw-material prices to remain elevated during the second quarter.
“Despite these pressures, CEAT delivered strong double-digit revenue growth, supported by healthy demand across segments and high capacity utilisation,” Managing Director and CEO Arnab Banerjee said.