JK Tyre & Industries Ltd has started shifting its raw material sourcing from West Asia to eastern markets as geopolitical tensions disrupt supply chains, raise freight costs and squeeze margins across the tyre industry.
Speaking during a post-earnings media call, Chairman and Managing Director Raghupati Singhania said the ongoing West Asia crisis had sharply increased crude oil prices, leading to inflation in crude-linked tyre raw materials and logistics costs.
“The West Asia has certainly disrupted the oil prices, which are a major input in most of the raw materials in the tyre industry,” Singhania said. “In Q1 of FY27, we expect anything between 16% to 20% cost increases in raw materials.”
To reduce dependence on West Asia-linked sourcing, JK Tyre has accelerated procurement from countries in East and Southeast Asia. “We moved on from west to east in our raw material sourcing,” Singhania said.
He said that countries such as Taiwan, Korea and China were becoming increasingly important sourcing hubs as supply chains undergo realignment.
India’s tyre industry remains heavily dependent on crude-linked inputs such as synthetic rubber, carbon black and nylon tyre cord. Rising oil prices, combined with container shortages and higher freight rates, have already triggered price hikes across the sector. Tyre makers including Apollo Tyres, CEAT and Balkrishna Industries have also warned of margin pressure and announced calibrated price increases in recent months.
JK Tyre said the rise in raw material prices, coupled with rupee depreciation, would impact profitability in Q1 FY27.
“To mitigate raw material price increases and sustain profitability margins, we have started increasing selling prices in a staggered manner,” Singhania said. “Further price increases to offset the raw material price increases are in the offing and hopefully another 5% to 6% increases may be undertaken.”
The company said it has already implemented price hikes of around 5% in replacement market categories, while price revisions in the OEM segment would come with a lag effect.
Alternative Materials Under Development
JK Tyre said it was also investing in research and development to reduce dependence on volatile commodity-linked raw materials.
“One of the important alternatives or the strategy we are adopting and we have adopted and working on it continuously is using alternate materials which are both maybe more friendly in terms of pricing as well as usage and availability,” Singhania said.
He added that the company had developed a passenger car radial tyre using 80% biodegradable material, which is currently undergoing testing.
“This is an outcome of our efforts in R&D to find alternate solutions. This is both cost-effective in the long term and also the availability is somewhat eased out,” he said.