Group photo of agency representatives

ICRA, a domestic tire demand assessment agency, said it expects 7-9% growth in 2022-23, but industry margins are expected to come under pressure due to higher investment prices. Gradual easing of supply constraints for passenger cars, increased growth momentum from commercial vehicle manufacturers and steady renewals are expected to support domestic growth during this period.

ICRA said in a statement, “OEMs are expected to grow domestic tire demand by 7-9% in fiscal 2023, driven by recovering demand in most product segments and steady growth in replacements.”

Debbadi, Vice President and Sector Head, ICRA, said that the tire industry continues to post record sales (consolidated sales for ICRA’s sample of tire manufacturers), driven by growth in domestic demand and exports, as well as cash growth.

She added, “Although domestic demand was relatively subdued in the third quarter of 2022, industry sales grew 12.5% year-on-year, driven by high liquidity.”

ICRA says 2022 will see a fiscal year recovery in tire demand, which is expected to grow 11-13% after two years of contraction due to a slowdown in the automotive industry and the COVID-19 pandemic.

However, the company added that OEM demand has been impacted due to supply-side issues such as sluggish sales of two-wheelers and shortage of semiconductor chips, decline in passenger vehicle production and tractor demand growth limited by high base.

The rating agency said, “Despite headwinds faced by the commercial sector in the third quarter of FY20222, replacement demand across product segments remained strong on account of inflationary cost trends, weak rural sentiments, base effect and other factors,” the rating agency said.”

For tire exports, ICRA said strong growth in tire exports in FY2022, driven by healthy demand in key exporting countries such as the US and Europe.

ICRA said, “With increasing acceptance of Indian tires in the international market, we expect the tire export outlook to remain favorable in the medium term. Tire imports continue to remain low on the back of favorable government regulations.”