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Rating agency ICRA in its latest report has maintained its domestic tyre demand’s growth estimate at 6-8% for FY2023, driven primarily by strong growth in the original equipment manufacturers (OEM) segment and muted growth in replacement volumes. It stated that OE demand shall witness a low double-digit growth supported by factors like easing supply-related headwinds in the passenger vehicle (PV) segment, improving two-wheeler (2W) demand, and strong growth in Commercial Vehicle (CV) segment amidst favourable macro-economic environment.

According to the report, replacement demand, which forms around two-third of tyre demand, is likely to witness mid-single digit growth in FY23 following a strong FY2022. It noted that growth in tyre exports from India was robust in FY2022 supported by healthy demand from key export destinations such as the US and European nations. However, it said the economic slowdown in the US and European nations is expected to impact export demand and growth is expected to be flat in FY2023. Over the next three years, tyre demand growth is pegged at 6-8% (CAGR) supported by stable replacement demand.

The report further said tyre industry has been investing around 10% of its revenues in capacity expansion over the past few years. It expects the industry to continue to invest around 10-12% of the revenues in the medium term. While part of the CAPEX shall be debt-funded, it said the credit profiles of tyre manufacturers would be supported by healthy earnings and cash reserves.

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