(MENAFN- IANS) New Delhi, Aug 25 (IANS) Driven by consistent investments in capacity expansion, improved manufacturing efficiency and a stronger focus on R&D capabilities, India's tyre industry is projected to see a robust growth in the current fiscal (FY26).

According to sector leaders, citing industry data, the domestic tyre industry is expected to achieve strong growth on the back of the strong domestic replacement demand despite muted OE (original equipment) offtakes.

The replacement demand will likely be supported by factors like favourable rural sentiments, festive demand, and expected rate cut effect on consumption, even as urban demand is soft, according to analysts.

The festive season, recent repo rate cuts, and favourable monsoon conditions are expected to boost consumer sentiment.

A recent Crisil Ratings report mentioned that India's tyre sector will see steady revenue growth of 7-8 per cent during the current financial year, driven by replacement demand that accounts for half of annual sales.

Rising premiumisation is expected to give a slight leg-up to realisations. However, escalating trade tensions and the risk of dumping by Chinese producers diverting inventories because of US tariffs could pose challenges, the report states.

Operating profitability is likely to remain steady at 13-13.5 per cent, supported by stable input costs and healthy capacity utilisation.

“This, along with strong accruals, lean balance sheets and calibrated capital spending, should help sustain the sector's stable credit outlook,” according to the report.

The report was based on an analysis of India's top six tyre makers, catering to all vehicle segments and accounting for 85 per cent of the sector's approximately Rs one lakh crore revenue. Domestic demand remains the mainstay, propelling around 75 per cent of total volume, with exports making up the rest.

According to Crisil Ratings senior director Anuj Sethi. volume growth is seen at 5-6 per cent this fiscal, mirroring last fiscal. The replacement segment, accounting for around 50 per cent of volume, is set to grow 6-7 per cent on the back of a large vehicle base, strong freight movement and rural recovery.

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