Crisil expects Indian tyre makers’ margins to moderate in FY27 due to rising rubber and crude-linked costs, with slower volume growth before profitability recovers in FY28.
Key points
- How Much Margins Are Actually Expected to Fall
- What's Actually Driving the Cost Spike
- Why Crisil Isn't Calling This a Long-Term Problem
- What Slower Volume Growth Means Alongside This
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Operating margins of Indian tyre manufacturers are projected to moderate by 200 to 250 basis points to approximately 11.5% to 12% in the current financial year, down from around 14.2% in FY26, according to a report by Crisil Ratings. The reason is fairly simple to state, if not simple to fix — raw material costs have gone up a lot faster than tyre companies have been able to raise prices.
How Much Margins Are Actually Expected to Fall
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1. How Much Margins Are Actually Expected to Fall
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2. What's Actually Driving the Cost Spike
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3. Why Crisil Isn't Calling This a Long-Term Problem
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4. What Slower Volume Growth Means Alongside This
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The margin compression comes down to a 35% to 40% increase in key input costs, a jump big enough that staggered price hikes from manufacturers simply haven't been able to catch up. That's a fairly wide gap between costs going up and prices adjusting and it's exactly the kind of lag that shows up directly on a company's bottom line before it eventually gets passed through to buyers.
What's Actually Driving the Cost Spike
Natural rubber, which makes up roughly half of the industry's raw material basket, rose to around Rs 275 per kg in June 2026, up from about Rs 220 per kg in FY26. That jump has been driven by unseasonal rainfall and supply disruptions across Kerala and Southeast Asia, two regions the Indian tyre industry leans on heavily for rubber supply.
On top of that, the geopolitical conflict in West Asia and shipping bottlenecks have pushed up crude-linked inputs too, including synthetic rubber, nylon tyre cord and carbon black. So this isn't a single-cause problem — it's rubber supply issues and crude-linked cost pressure hitting at more or less the same time, which is part of why the margin hit is as sharp as it is this year.
Why Crisil Isn't Calling This a Long-Term Problem
"A sharp 35-40% rise in key inputs is likely to compress tyre makers' operating margins by 200-250 basis points this fiscal, but this is a cost-pass-through lag rather than a structural profitability reset," said Anuj Sethi, Senior Director at Crisil Ratings. "Demand resilience and GST rationalisation are allowing staggered price hikes and as these flow through, assuming input costs stabilise, margins should recover to 13-13.5% next fiscal."
In plain terms, Crisil's view is that this is a timing issue, not a sign that the tyre business has become permanently less profitable. Prices are catching up, just with a lag and margins should climb back toward where they were once that catch-up finishes and input costs settle down.
For anyone running trucks or pickups and watching tyre replacement costs, this lag is exactly what's been showing up as repeated price hikes from manufacturers over the past several months. It's the same underlying pressure playing out in real time on the ground, well before it shows up as a line item in a ratings agency's quarterly report.
What Slower Volume Growth Means Alongside This
The findings are based on an analysis of India's top six tyre manufacturers, which together account for about 85% of the sector's Rs 1.36 lakh crore revenue reported in FY26. Overall tyre volume growth is expected to moderate to 4% to 5% this fiscal, down from 7% to 8% growth in the previous year.
Breaking that down further, both aftermarket and OEM volumes are forecast to grow 4% to 5% each, while exports are projected to rise a more modest 3% to 4%. Slower volume growth landing at the same time as higher costs is a genuinely tough combination for any manufacturer — it means companies can't simply "grow their way out" of the margin squeeze through higher sales volumes this year.
This cost pressure isn't limited to passenger tyres either. It flows through the entire tyre segment, including the tyres fitted on mini trucks and the wider commercial vehicle category and even touches the supply chain for components going into electric mini trucks, since tyre costs are part of the overall vehicle running-cost equation regardless of what powers the drivetrain. Fleet owners budgeting for the rest of FY27 would do well to factor in continued tyre price pressure until this rubber and crude-cost cycle actually eases off.
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Frequently Asked Questions on Tyre Industry Margins for FY27
Q1. How much are tyre makers' margins expected to fall in FY27?
Ans. Crisil expects operating margins to moderate by 200-250 basis points to around 11.5-12% in FY27, down from 14.2% in FY26.
Q2. What is driving the rise in raw material costs?
Ans. Natural rubber prices rose to around Rs 275 per kg due to unseasonal rainfall and supply disruptions in Kerala and Southeast Asia, while the West Asia conflict and shipping bottlenecks have pushed up crude-linked inputs like synthetic rubber, nylon tyre cord and carbon black.
Q3. When are margins expected to recover?
Ans. Crisil expects margins to recover to 13-13.5% in FY28, assuming input costs stabilise and staggered price hikes continue to flow through.
Q4. How much is overall tyre volume growth expected to slow this year?
Ans. Tyre volume growth is expected to moderate to 4-5% in FY27, down from 7-8% in FY26, with aftermarket, OEM and export volumes all growing at a slower pace.|