JK Tyre Plans Further 4-5% Price Hike in Q3 as Raw Material, Freight Cost Pressures Persist

JK Tyre & Industries plans to increase tyre prices by another 4-5% in the third quarter of FY27 as rising raw material and freight costs continue to put pressure on profitability, despite strong growth in domestic demand.

The proposed increase follows cumulative price hikes of around 11-12% during the first half of the financial year.

In the September quarter, the company's raw material price basket rose approximately 9% sequentially, and the cumulative effect for six months of the financial year was around 30%, according to the management. In Q3, the company expects a further increase of 4-5%.

"In Q2, we increased (tyre) prices by 7% on a QoQ basis. In Q1 we had increased about 4% to 5%. So on a six month basis, we have increased prices by 11% to 12%," Anshuman Singhania, Managing Director of JK Tyre & Industries, said during the company's post-earnings interaction on Friday. "And we intend to also increase prices in Q3 in the range of 4% to 5%," he added.

The planned increase comes as JK Tyre reported its highest-ever quarterly consolidated revenue from operations of Rs 4,840.73 crore in Q2 FY27, up 20.7% from Rs 4,011.31 crore a year earlier. Total income stood at Rs 4,849.96 crore. However, consolidated profit after tax fell 73% to Rs 59.99 crore from Rs 222.55 crore in the corresponding quarter last year.

Consolidated EBITDA declined 35.9% year-on-year to Rs 343.14 crore from Rs 535.68 crore. The EBITDA margin contracted to 7.1% from 13.4% a year earlier, a decline of approximately 630 basis points.

According to the company's consolidated financial results, the cost of materials consumed increased 11.7% sequentially and 39% year-on-year to Rs 3,392.71 crore in Q2 FY27. The increase in raw material expenditure outpaced revenue growth, adding to pressure on operating margins.

Raw materials, including natural and synthetic rubber, carbon black and other petroleum-based inputs, account for a substantial portion of tyre manufacturing expenses. Rising crude oil prices and supply disruptions linked to geopolitical tensions in West Asia have increased costs across the industry.

Singhania said JK Tyre was gradually increasing selling prices to recover these costs, but passing the entire increase to customers takes time, particularly in a price-sensitive market.

"As you know that the raw material increase is putting a lot of pressure on margins. But we are steadily increasing our prices to pass through," he said.

He explained that tyre makers typically experience a lag between changes in raw material costs and corresponding revisions in selling prices. In the original equipment manufacturer (OEM) business, price adjustments are also governed by index-linked arrangements, meaning some increases are reflected in later quarters.

The company is additionally facing elevated container freight rates, which management said remain significantly above historical levels. Higher shipping costs have affected exports across multiple geographies, adding to pressure from raw material inflation and supply chain disruptions.

Chief Financial Officer Sanjeev Aggarwal said the company was seeking to recover both earlier cost increases that had not yet been passed on and the additional inflation expected in Q3. However, he cautioned that it was difficult to predict the extent of margin recovery because of the Indian market's sensitivity to prices.

To reduce the impact of higher costs, JK Tyre is focusing on manufacturing efficiencies and increasing the contribution of higher-value products, particularly passenger car tyres measuring 16 inches and above.

Singhania said larger-rim tyres were gaining traction in both the OEM and replacement markets. Their contribution to the company's passenger car OEM tyre mix increased to around 40% in the first half of FY27 from 35% in FY26, supported by growing demand for SUVs and new vehicle models.

The pressure on profitability comes despite healthy domestic demand. JK Tyre's domestic sales increased 32% year-on-year in Q2, driven by a 65% rise in OEM sales, while replacement sales grew 20%, according to management.

Singhania said automakers were witnessing healthy order books across passenger and commercial vehicles and expected demand momentum to continue in the second half of the financial year.

The cost pressure is not limited to JK Tyre. Domestic tyre manufacturers have been increasing prices as rising crude oil and commodity costs affect production. In a September 30 industry update, rating agency ICRA projected that domestic tyre industry operating margins could contract by around 200 basis points in FY27 because of sharp raw material inflation, even as domestic tyre demand grows by an estimated 5-7%.

JK Tyre expects its planned price increases, better manufacturing efficiencies and a richer product mix to support margin recovery, although management has not provided a specific timeline for returning to previous profitability levels.