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Tyre industry to post higher volume growth in FY18

10/04/2018 | Author: Autoguide | 0 Comments Back To Home   < Previous News   |   Next news >

ICRA Report

Indian tyre industry is expected to post a higher volume growth of 8-10 per cent for FY2018, according to a new report by ICRA. According to the agency, the growth will be supported by robust growth pick-up across all industry sub-segments. 
According to the report, automobile production in FY2018 is expected to rise strongly by 14 per cent plus, up from 5.2 per cent in FY2017 and 3.2 per cent in FY2016. Thus a strong traction in OEM volumes during April 201717 – January 2018 coupled with the traction in replacement markets post the Goods and Service Tax (GST) upheaval, the volume growth estimates for tyres has been scaled up from an earlier 7-8 per cent to 8-10 per cent.
Mr Subrata Ray, Sr. Group V-P, Corporate Sector ratings, ICRA, said, “With stronger than expected volume uptick in M&HCV tyres (OEM and replacement segments), tyre tonnage demand is estimated to grow by 8 per cent (up from 7 per cent). In unit terms, Truck and bus (T&B) replacement demand is expected to grow by 4-5 per cent during FY2018, up from the 3 per cent de-growth in FY2017, supported by pickup in infrastructure activity around the county. ICRA’s five-year volume estimations indicate that FY2019-20 would continue to be strong years for the industry. While radialisation in T&B would promote higher re-treading and therefore could lead to slower demand for new tyres, benefits from the visible trend towards higher tonnage multi-axle vehicles with increasing number of tyres will support T&B volumes.”
On the exports front, USA, Germany and the UAE continue to remain the key destinations while South American markets have shown a strong recovery. Exports (in volumes) grew by 12 per cent during 8Months of FY2018, riding on the healthy demand across product segments, mainly premium tyres. Export volumes are estimated to grow by 10-12 per cent for FY2018 and 8-9 per cent during FY2019-22 with favourable demand outlook and rising competitiveness of Indian tyre makers, both in terms of quality and pricing, the ICRA report stated.
As for imports, the same have declined by 31 per cent (volume-wise) in FY2018 post demonetisation and re-imposition of anti-dumping duty (ADD) on import of new Chinese Truck and Bus radial (TBR) tyres. 
Mr Ray further said, “We expect the industry (represented by ICRA’s sample of seven major tyre companies) to grow by 10-12 per cent (value) during FY2018 supported by strong volumes from OEMs, price hikes (Jan-May’17), pick-up in replacement demand and benefits of the ADD implementation on Chinese TBR in Sept-17 which lead to a pickup in sales for domestic companies. Operating margins are estimated to contract to 13 per cent in FY2018 before stabilising at 14 per cent during FY2019-22. Despite heavy capex in the coming five years (FY2018-22), the industry is expected to fund the same from the significant pile of accruals during the past three years, leading to a stable credit profile for the industry.” 

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