Indian tyre makers face margin pressure and higher capex outlay in FY27: Report

FY26 witnessed demand growth, improving profitability, sustained investments in tyre industry, but FY27 would face margin pressure and higher capex outlay.

The Indian tyre industry delivered a strong performance during FY26, with all three leading listed manufacturers, including Apollo Tyres, CEAT and MRF, reporting healthy standalone revenue growth. However, FY27 is likely to witness a more challenging cost environment even as the manufacturers continue to invest in capacity expansion and premium products.

While FY26 witnessed demand growth, improving profitability and sustained investments in the Indian tyre industry, in FY27 the tyre makers are likely to face margin pressure and higher capex outlay.

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Equirus Securities has analysed the FY26 annual reports of Apollo Tyres, CEAT and MRF to identify the key trends shaping the Indian tyre industry. The analysis suggests that while FY26 was characterised by broad-based demand growth, improving profitability and sustained investments, in FY27 the Indian tyre makers are likely to face margin pressure and higher capex outlay.

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In its analysis, Equirus Securities said that CEAT led the pack in FY26 with 15.5% year-on-year (YoY) revenue growth, followed by MRF at 10.8% and Apollo Tyres at 9.0%, with both Apollo and CEAT recording a notable acceleration over FY25. It also stated that industry volumes expanded in double digits during FY26, supported by healthy replacement demand and resilient OEM offtake. Demand gained further momentum during the second half of last fiscal following GST rationalisation, while exports remained healthy during the first half before moderating later in the year because of geopolitical uncertainties.

It further stated that the Indian tyre industry's profitability improved significantly during FY26 as raw material costs eased for most of the year. Lower crude prices helped keep prices of key crude-linked inputs such as carbon black, synthetic rubber and chemicals relatively stable, resulting in a meaningful decline in raw material costs as a percentage of sales across all three companies.

Challenging times ahead in FY27

While in FY26, the Indian tyre industry benefited from a favourable cost environment, the outlook for FY27 has become more challenging, stated the report. Natural rubber prices have increased sharply, crude oil prices have shot up amid geopolitical tensions, and the Indian rupee has depreciated against the US dollar, increasing the cost of imported raw materials. These factors are expected to place renewed pressure on input costs and margins across the industry. MRF has also echoed similar thoughts in its FY26 annual report, highlighting elevated commodity prices as an important margin headwind.

The report also noted that capital expenditure remained a key strategic priority during FY26 as tyre manufacturers continued investing to expand capacity and strengthen product portfolios. Apollo Tyres nearly doubled its standalone capital expenditure while significantly increasing committed investments for passenger car radial expansion in Andhra Pradesh and Hungary. CEAT continued investing across passenger vehicle, truck and bus radial, two-wheeler and speciality tyre capacities, while MRF also reported higher capital expenditure alongside a sharp increase in committed investments, signalling an accelerating industry-wide capex cycle that is expected to continue into FY27.

Premiumisation continues to be one of the strongest long-term trends across the sector. All three companies expanded their presence in higher-value product categories through new launches, technology development and deeper OEM partnerships.

Apollo Tyres strengthened its Ultra High-Performance portfolio and expanded premium OEM fitments under the Vredestein brand. CEAT introduced new premium motorcycle tyres, advanced technology platforms including Run Flat Technology and CALM Tyre, while also launching 240 new products during the year. MRF expanded its premium portfolio by becoming the first domestic manufacturer to supply 20-inch OE tyres for passenger vehicles in India and introduced acoustic foam tyres designed specifically for electric vehicles.

The report stated that although higher raw material costs could moderate profitability in FY27, the continued pace of investments in manufacturing capacity, research and development, premium products and technology suggests that leading tyre manufacturers remain focused on strengthening their competitive positioning and capturing long-term growth opportunities.