The domestic tyre industry is expected to post volume growth of 8% to 1,805 lakh tyres during FY2018, despite the weak volumes during Q1 and part of Q2 during GST roll-out. In tonnage terms, tyre demand is estimated to grow by 7% during FY2018 supported by pick-up in T&B replacement demand after over two years of weak growth and; for FY2019, the unit and tonnage growth is pegged at 8.5% and 7%, respectively, said an Icra note. It is also expected that the tyre industry is to post 10% growth during FY18-22 period. While price cuts during 9MFY17, capped revenues during FY2017, price hikes between January-May 2017 coupled with modest volume growth is expected to support an 8% revenue growth during FY2018; during H1FY18, the industry posted 6.7% growth in revenues.
Despite heavy capex in the coming five years FY18-22, 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. ICRA expects the capacity addition to continue over next five years given the large cash balances, strong accrual position and favourable demand. Capex investments are likely to continue with planned Rs 25,000 crore of investments spread across the next five years.