India’s tyre industry is expected to post a steady 7-8% revenue growth in FY26, buoyed largely by the replacement market which accounts for nearly half of total sales, according to Crisil Ratings. The sector’s growth comes even as OEM demand remains tepid and exports stable amid rising trade risks.
The replacement segment is projected to grow 6-7%, supported by a growing vehicle base, robust freight activity, and rural market recovery. Overall volume growth is estimated at 5-6%, similar to the previous fiscal, with OEM demand expected to inch up 3-4% and exports likely to rise 4-5%, led by demand from Europe, Africa, and Latin America.
“Replacement demand will remain the sector’s backbone this year,” said Anuj Sethi, Senior Director, Crisil Ratings. “Export volumes, which made up about a quarter of overall volume last fiscal, will also contribute, though there are growing risks from global trade tensions.”
One key concern is the risk of cheap Chinese tyres flooding price-sensitive markets like India. With the US slapping heavy tariffs on Chinese goods, there’s a likelihood that excess Chinese inventory will be diverted, intensifying competition. Though India imposes anti-dumping and countervailing duties on some categories, broader dumping across segments could pressure domestic prices.
Operating profitability for tyre makers is expected to remain rangebound at 13-13.5%, aided by stable input costs and high capacity utilisation. However, manufacturers are facing cost headwinds. Global natural rubber prices surged 8-10% last fiscal due to weather-related supply disruptions in key producing nations, while prices of crude-linked inputs such as synthetic rubber and carbon black rose 10-12%. As a result, sector margins fell by about 300 basis points.
Poonam Upadhyay, Director at Crisil Ratings, noted that continued margin pressure could intensify competition. “With limited ability to pass on rising input costs, especially in the replacement and OEM segments, profitability remains vulnerable,” she said.
In response, tyre makers are likely to maintain their capex at around ₹6,000 crore, with investments focused on high-utilisation categories like passenger car radials and two-wheeler tyres, as well as automation and backward integration to bolster efficiency.
Despite the high investment activity, capex to EBITDA is projected at ~0.5x: strong cash accruals and conservative financial policies are expected to keep credit profiles stable. Interest coverage and debt-to-EBITDA ratios are forecast to improve to ~8.0x and ~1.0x respectively, from ~7.0x and ~1.3x last year.
Crisil’s analysis is based on India’s top six tyre manufacturers, who together account for about 85% of the industry’s ₹1 lakh crore revenue.
Looking ahead, Crisil said key monitorables include trends in crude and natural rubber prices, the evolving impact of US-China trade dynamics, and domestic demand across replacement and OEM segments.