Operating margins of Indian tyre manufacturers are projected to moderate by 200 to 250 basis points to approximately 11.5% to 12% in the current financial year, down from around 14.2% in FY26, according to a report by Crisil Ratings.
The margin compression is driven by a 35% to 40% increase in key input costs that has outpaced staggered price hikes implemented by manufacturers. Natural rubber, which accounts for roughly half of the industry's raw material basket, increased to around Rs 275 per kg in June 2026 from approximately Rs 220 per kg in fiscal 2026 due to unseasonal rainfall and supply disruptions across Kerala and Southeast Asia. Concurrently, geopolitical conflict in West Asia and shipping bottlenecks have elevated crude-linked inputs, including synthetic rubber, nylon tyre cord, and carbon black.
Margins Seen Recovering to 13-13.5% in FY28
"A sharp 35-40% rise in key inputs is likely to compress tyre makers' operating margins by 200-250 basis points this fiscal, but this is a cost-pass-through lag rather than a structural profitability reset," said Anuj Sethi, Senior Director at Crisil Ratings. "Demand resilience and GST rationalisation are allowing staggered price hikes, and as these flow through, assuming input costs stabilise, margins should recover to 13-13.5% next fiscal."
Tyre Volume Growth to Moderate to 4-5% in FY27
The findings are based on an analysis of India's top six tyre manufacturers, which account for about 85% of the sector's Rs 1.36 lakh crore revenue reported in FY26. Overall tyre volume growth is expected to moderate to 4% to 5% this fiscal, compared to 7% to 8% growth in the previous year. Aftermarket and original equipment manufacturer (OEM) volumes are forecast to grow by 4% to 5% each, while exports are projected to rise by 3% to 4%.