Organised tyre retreading to grow at 7-9% CAGR during FY2023-26, as recycling norms provides push

CNH Industrial India is the latest original equipment manufacturer (OEM) to have applied for the Extended Producer Responsibility (EPR) certification on May 3 this year. The EPR programme, initiated by the government, mandates producers, importers, recyclers, and re-treaders to ensure effective utilisation and management of waste tyres. 

This development follows similar applications by Balkrishna Industries, a major OTH tyre manufacturer, in February, and Case New Holland Construction Equipment India in January. The Central Pollution Control Board (CPCB), under the Ministry of Environment, has already granted registrations to 144 producers and 252 recyclers during FY23–24.

The EPR guidelines, which came into effect in July 2022, set a recycling target of 70% of the weight of new tyres manufactured or imported in FY2022 for FY24. This target increases to 100% in FY25 and subsequent years. Based on the quantity assigned in EPR obligation, the producer will accordingly purchase EPR certificate from a registered recycler. A producer can also purchase a retreading certificate from the registered retreader for the deferment of its EPR obligations. On submission of the EPR certification, the extended producer responsibility obligation shall be deferred by one year for the corresponding quantity of waste tyres. 

Helping transporters with cost savings

The EPR programme is expected to boost the re-treading market, which offers significant cost savings for transporters, particularly the smaller ones. Re-treading costs 20–50% of a new tyre due to the reuse of the casing, a key component accounting for roughly one-third of the tyre's total cost. Analysts suggest that re-treading can be done two to three times while maintaining 80% of the quality of a new tyre, offering substantial economic benefits.

From an environmental standpoint, re-treading reduces the carbon footprint by lowering the demand for crude oil derivatives and natural rubber.

ICRA bullish on re-treading market growth

Srikumar Krishnamurthy, Senior Vice President and Co-Group Head at ICRA, expressed optimism about the EPR guidelines' impact. He believes that along with a focus on sustainable tyres, radialisation, and participation from organised players, advancements in re-treading technologies, and improved road infrastructure, the EPR programme will contribute to 7-9% CAGR growth for the organised re-treading market over FY2023-26. "The full scale of ESR's impact will become visible by FY26," Krishnamurthy remarked.

This projection contrasts with the subdued growth of 1-3% witnessed during FY19-FY22, which can be attributed to the COVID-19 pandemic and sluggish commercial vehicle sales. Trucks dominate the CV segment, contributing 60–65% to the re-treading market, followed by buses at 15-20%. Over 70% of CV tyres are believed to be re-treaded at least once. Nithya Debbadi, Assistant VP and Sector Head, Corporate Ratings, ICRA Limited, said, "With an uptick in demand for commercial vehicles, the re-treading industry is likely to benefit."

Market dynamics and growth strategies

With the unorganized sector holding over 50–60% of the re-treading market, the entry of major players like CNH Industrial is expected to accelerate the shift towards organised re-treading. However, for sustained growth, tyre manufacturers will need to establish a robust pan-India dealer or franchise network to ensure wider market penetration.