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The rating agency ICRA in its latest report has maintained its domestic tyre demand growth forecast at 6-8% for FY2024 on the back of favourable demand from the original equipment manufacturer (OEM) segment and expected revival in replacements. An improved product mix and range-bound input costs are expected to enhance the margins by 200-300 bps in FY24. 

According to the report, the OEM segment is expected to grow by 7-9% YoY in FY2024 on the back of favourable prospects for most of the product categories. Easing of supply-related headwinds, preference for personal mobility, and rising disposable income of consumers are likely to support passenger vehicle (PV) demand. It stated that Commercial Vehicles (CV) demand continues to be supported by infrastructure and construction activities, although some sluggishness was seen in Q1 with pre-buying ahead of BS-6 2.0 emission norms transition. Demand recovery in the two-wheelers segment has been gradual, and the momentum in the next few quarters will depend on the monsoon performance.

ICRA expects mid-single-digit growth in the replacement segment in FY2024. Following two years of pent-up demand and an increase in prices, volume growth is likely to witness some stabilisation in FY2024. It noted that the demand was subdued to some extent in the last 2-3 months, although the same is likely to recover with improving urban and rural sentiments. However, it said the impact of an unfavourable monsoon distribution and El Nino occurrence on rural demand will remain under focus. Tyre export volumes contracted by 7% YoY in FY2023 owing to reduced demand from key markets on the back of economic slowdown and inflationary pressure. ICRA expects the export demand to remain subdued for the next couple of quarters.