Over the past two years, the agency’s automobile production has fallen about 13 percent to 15 percent. Weak consumer confidence and slowing economic activity led to a decline in domestic tire demand of about 8 percent in the fiscal year 2021 weak consumer confidence and slowing economic activity.

After two years of contraction, demand in the Indian tire industry is expected to grow by 13% in the current fiscal year, with the Original Equipment Manufacturer (OEM) segment growing by-15% and the Alternative Market segment growing by 7-9% .ICRA Rating Agency.

ICRA said that based on the expected demand growth, the capital expenditure in the tire industry is expected to exceed Rs 20,000 crore by the fiscal year 2022 also said that the implementation of capital expenditure has been resumed in the last few years after a hiatus of a few months in improving the domestic export demand. It is. In FY25, part of the financing will be through debt financing.

Demand outlook for the tire industry remains positive and growth is expected to be impacted by OEMs in the current financial year Significant recovery in demand for tires in FY2021 Significant recovery in demand for tires in FY2021 Reduced base effect in the financial year, accelerated pace of vaccinations, sustained preference for personal liquidity, and healthy rural cash flows. Leader. This is a normal monsoon forecast, the rating agency said in a statement.

Srikumarrr Krishnamurthy, Vice President and Joint Group Head, ICRA “Demand for tires is relatively flexible as compared to other automotive components as replacement demand in the tire industry is largely independent of cyclicality.”

He added that weak consumer confidence and sluggish economic activity have led to a decline in automobile production by about 13% to 15%, while domestic demand for tires has declined by about 8% through FY2021.

“Like the entire automotive sector, the national blockade led to a significant decline in tire demand in the first quarter of the 2021 national blockade fiscal year, but the recovery in tire demand in 2021 The second quarter of the fiscal year reached the levels seen prior to the Covid-19 Krishnamurti said, and saw a healthy growth in the second quarter.

ICRA expects domestic tire demand to grow at a compound annual growth rate (CAGR) of 7-9% from FY22 to FY25, driven by steady replacement demand, OEM demand and export recovery.

After two years of contraction, the Indian tire industry is expected to grow demand by 13-15% and 7-7% in 2021-22, driven by steady OEM growth in the replacement parts segment, the rating agency said.

On the export front, ICRA said that Indian tires, which account for nearly one-fifth of the tire industry’s revenue, are expected to support increased acceptance of Indian tires in the coming years.

Exports are growing by 10% in volume and 8% in quantity. He added that following a small contraction in FY 2020, following a small contraction in FY 2021 exports grew significantly in FY 2021. “Exports in FY2021 were supported by healthy demand from major export destinations like the US, European countries, mainly agriculture and construction.”

Previously, tire imports declined by 77% and 51% respectively because the Directorate General of Foreign Trade (DGFT) changed all tire import categories from free to restricted categories. This figure will be 20% in FY 2021, ICRA added.

ICRA said the implementation of capital expenditure has resumed after a few months of suspension with improvement in domestic export demand.

ICRA added, “On the basis of expected demand growth, we expect capex of over Rs 20,000 crore in FY2022-FY25, a part of which will be financed through debt.” The tire makers’ credit profile will be supported by stable profits and cash, he added. ICRA said the rating agency will continue to maintain a stable outlook for the Indian tire industry.