Driven by a sharp 20% rise in input costs, tyre manufacturers in India have had to make multiple rounds of price hikes over the last few months. This is thanks to the conflict in West Asia.

India’s tyre makers are confronting a familiar problem in an unfamiliar form. While demand remains steady, a rapid rise in input costs is compressing margins and beginning to alter buying behaviour.

How quickly companies can push through higher prices without weakening demand could shape the industry’s earnings trajectory this year.

There is already a visible crack that shows what happens when the pressure builds: fleet operators, faced with sharply higher replacement tyre prices, are choosing to retread their old tyres.

Retreading is a process that allows them to reuse worn tyres by refurbishing the surface with a new layer of rubber, rather than buy new ones. It's a small shift, but it's the clearest evidence yet of the effects of the price rise.

For now, the sector is betting that this is a near-term margin problem, not a long-term demand one. And that FY27, taken as a whole, stays on a positive run.

Why The Spike Is Different

According to the Automotive Tyre Manufacturers Association (ATMA), crude oil derivatives, including synthetic rubber, carbon black, processing oils, polyester or nylon tyre cord fabric, make up an estimated 60-70% of total raw material cost, making tyre makers acutely sensitive to oil swings.

Natural rubber accounts for roughly 30% of the input mix by volume, carbon black about 25%, synthetic rubber 20%, fabric near 10%, showed estimates that ICRA shared with The Core.

Even natural rubber, not directly crude-linked, tracks oil indirectly since it is globally substitutable with synthetic rubber.

India imports 35-45% of its natural rubber needs, mainly from Southeast Asian countries including Indonesia, Vietnam and Thailand, keeping domestic prices tied to global trends regardless of local supply, Nithya Debbadi, vice president and sector head at Corporate Ratings at ICRA told The Core.

To make matters worse, global supply of natural rubber can't keep up with demand. The shortage stems from a combination of bad weather, aging trees, and low yields from small farmers. Prices reflect the pressure, as natural rubber has jumped from Rs 190 per kg in December 2025 to about Rs 270 kg now, a 42% rise in just six months.

Meanwhile, crude traded near $65 a barrel at the start of the March quarter, surged past $100 by March and stayed elevated until May, pushing imported input costs on top.

Sanjeev Aggarwal, chief financial officer (CFO) of JK Tyre, told The Core that historically, previous cost cycles were driven largely by natural rubber alone. This time it is a “multi-dimensional impact,” as nearly every input rose sharply and in tandem, with rupee depreciation adding further pressure.

The tyre manufacturing sector was now navigating "actual and physical disruptions,” said CEAT CFO Kumar Subbiah during the company’s Q4 earnings call. In the previous quarters, the volatility had been driven by sentiments.

The Price Hike

Aggarwal of JK Tyre told The Core that raw material costs had climbed by nearly 20%, describing the increase as particularly sharp given it unfolded over just four to five months.

JK Tyre's raw material basket rose 1.3% sequentially in the March quarter, Managing Director Anshuman Singhania said during the company's fourth-quarter earnings call.

CEAT managing director and chief executive Arnab Banerjee pointed to a similar trend during the company’s earnings call, saying raw material prices in the fourth quarter were marginally higher than in the previous quarter, but are expected to rise more than 15% in the first quarter.

By the end of the quarter, the increase could be near 20%, which he described as a "steep" rise within a three-month period.

During the Q4 earnings call, Apollo Tyres CFO, Gaurav Kumar projected a sequential increase in raw material costs in the "high teens."

With costs mounting, ATMA is pressing the government for relief on multiple fronts. The industry body is seeking an extension of the customs duty exemption on select raw materials including PBR, SBR and resins, beyond its current deadline of June 30, 2026, to at least March 2027.

It is also calling for customs duty and quality control order exemptions on key raw materials, a deferment of anti-dumping and countervailing duty cases, and priority sector status for the tyre industry and its tier-one suppliers for industrial gas supply.

On natural rubber specifically, the industry wants port restrictions on imports lifted immediately. Currently, natural rubber can only be brought in through Chennai and Nava Sheva, a limitation in place since January 2016. ATMA is also seeking a restoration of the export obligation period to 18 months and the removal of the pre-import condition on natural rubber, arguing that these restrictions are adding unnecessary friction at a time when the industry is already navigating a sharp cost cycle.

The Mechanics Of The Lag

Crude oil prices recently tumbled, and Brent crude futures hover around $73 a barrel now. An industry executive, who did not wish to be named, told The Core that while the recent moderation in crude is a positive sign, its effect on the overall cost basket will flow through with a lag, contingent on how sustained that moderation proves and on movements in rubber, currency and logistics costs.

Crude oil price movements typically take time to filter into raw material costs, given the inventory buffers manufacturers maintain. Pass-through to customers is just as gradual, said Debbadi of ICRA, slowed further by intense competition among players.

The structure varies by channel. OEM prices are indexed to a raw-material basket and revised only on a periodic lag by design, leaving manufacturers to carry the gap in the interim. Replacement pricing has no fixed schedule, which cuts both ways, letting manufacturers raise prices faster when costs spike, but also letting competitive pressure delay pass-through indefinitely.

Meanwhile, replacement sales made up 63% of JK Tyre's revenue in the March quarter, against 27% from OEMs and roughly 10% from exports.

According to Debbadi, realisations in the replacement market can run 20-50% higher than OEM pricing, with better margins despite added dealer costs. ICRA views manufacturers with a larger replacement share as structurally better placed to ride out the shock. In FY2027, it projects that replacement volume growth would be higher for two-wheelers compared to other segments.

A Parallel Disruption

An ATMA spokesperson told The Core that the Indian tyre industry is among the few manufacturing sectors with an export-to-turnover ratio as high as 26-27%. In FY26, tyre exports breached the Rs 27,000 crore mark for the first time, growing 9% year-on-year.

However, the same conflict driving up input costs briefly slowed a market on the other side. West Asia absorbs an estimated $250-260 million worth of Indian tyres annually.

For CEAT, the region is about 15% of international business, and in Q4, the region's sales were “practically zero," Banerjee said.

The company is leaning on a diversified international book including Southeast Asia, Europe, the US, Latin America.

Apollo reported similar export disruption tied to the same logistics and energy uncertainty, particularly in Europe, Managing Director Neeraj Kanwar said during the Q4 earnings call.

The Crack, Explained

While ICRA is bullish on replacement demand in consumer segments including passenger vehicles and two-wheelers, Crisil Intelligence pointed to commercial operators who have been pushed toward retreading old tyres and postponing fresh purchases. In the near term, this is likely to stay under some pressure, even as OEM demand remains strong.

Yet the wider demand picture remains healthy. Hemal Thakkar, senior director at Crisil expects FY27 growth in higher single digits, and ICRA's Debbadi projects industry-wide volumes growing 5-7% over the year, helped by healthy rural cash flows, lower prices following the GST cuts, and rising disposable incomes.

Singhania also struck a similar note earlier, acknowledging that geopolitical uncertainty has disrupted some supply chains, but the underlying structural demand "remains intact," leaving JK Tyre optimistic about FY27.

Relief Soon?

While it has been a tough few quarters, there could be relief soon.

“Recently, raw material prices have started cooling off, and tyre manufacturers will not roll back prices. So, beyond Q1 the margins will only get better,” Thakkar told The Core.

In 2022-23, the industry faced an even steeper 40%-plus increase in raw material costs, denting margins over five to six quarters through FY23 due to an under-recovery of about 3-4%.

“This time, though, the raw material price increase has been quite sharp in a short span of 4-5 months, but the impact is expected to be limited to the first half of FY27,” Aggarwal of JK Tyre told The Core.

CEAT earlier said the replacement demand in truck and bus radials could ease to single-digit growth if the full cost increase is not adjusted in the market. Though it ultimately depends on how fuel prices behave and how overall GDP sentiment moves.

“If there is a demand for movement of trucks, tyres will need replacement. The demand will come down, but it won't turn into negative territory,” Banerjee said, during the Q4 earnings call.

Who Outlasts The Gap

With the cost cycle largely common to all players, positioning through the gap may come down to how differentiated each company's business is beyond the tyre itself.

JK Tyre is leaning on services and premium products including fleet management, digital tools, and what Singhania calls "selling miles” rather than just selling tyres in the CV business, alongside newer puncture-resistant and connected smart tyres for passenger vehicles. "There we have definitely created a lot of strong boundaries and walls for the other players to duplicate that," he said.

Aggarwal added the company is protecting margins through premiumisation, cost discipline across manufacturing, sourcing and logistics, alternative sourcing from Southeast Asia and Africa, greater localisation, built-up raw material inventories, and stepped-up currency hedging on imports.

Apollo is betting on scale instead. Kumar told The Core the company is relying on its global sourcing and manufacturing footprint to manage commodity cycles and supply chain disruptions. The company expects full capacity utilisation and is directing nearly 80% of its Rs 35 billion FY27 capital expenditure toward growth rather than maintenance.

The risk this year will depend on how long the gap between cost and price takes to close, and how much of it customers quietly work around.