Tyre margins skid on costly rubber, firms mull more price hikes

New Delhi: A sharp rise in natural and synthetic rubber prices, driven by erratic weather and the West Asia war, is squeezing the margins of India’s tyre makers and prompting them to consider further price hikes. And strong demand from automakers is also seen giving them some room to pass on higher costs, according to companies and industry experts.

Top tyre makers, such as Ceat and JK Tyres, have seen their margins erode due to a rise in prices of raw materials, including rubber. Domestic prices of RSS4 rubber have risen 62% to ₹300 a kg from ₹185 in November 2025, per data from CMIE and the Rubber Board. Rubber makes for about half the cost of manufacturing a tyre.

JK Tyres’ earnings before interest, tax, depreciation and amortization (Ebitda) fell 36% year-on-year to ₹343 crore in the September quarter, while profit after tax fell 73% to ₹60 crore. Ceat saw its Ebitda slip 11% to ₹452 crore and profit down 40% from a year ago to ₹112 crore.

Ceat chief financial officer Kumar Subbiah told Mint that the company will resort to further price hikes, as the previous price increases over the last seven months have not offset the cost surge for the company that produced 4.5 crore tyres in FY26.

"Tyre prices have been increased by us progressively in the last six to seven months, but they have not fully compensated the raw material cost increases, and hence our margins have come down. There is still a plan to take our prices further,” said Subbiah in an email response to Mint’s query.

Both Ceat and JK Tyres have flagged the hit from input cost spikes during their post-earnings calls last month. They said the inflation in prices of raw materials—rubber and carbon black, along with some chemical additives, silica, and steel—continued to weigh on their margins.

JK Tyres managing director Anshuman Singhania said in a 26 October post-earnings analyst call that input costs rose 9% sequentially, and that the company sees a further 4-5% increase in Q3, the ongoing quarter.

The company increased its net sales realization, its take-home income from tyre sales, by 11-12% in the last six months, and plans to raise it by 4-5% in the December quarter, said Singhania, whose company has a production capacity of 3.8 tyres per year.

“Cumulatively, in the last six months, raw material costs have gone up by 30% due to inflationary pressure and supply chain constraints created by West Asia crisis," said Sanjeev Aggarwal, chief financial officer of JK Tyre.

" As macro commodity pressures persist for the industry, we remain focused on disciplined price revisions, operational efficiencies, and a higher share of value-added, premium products to build resilience against input inflation," said Aggarwal.

JK Tyre posted ₹4,850-crore revenue in the September quarter, a 20% year-on-year growth. "There is a very strong demand momentum in the last one year across segments post GST 2.0 reforms and we are expecting the same to continue through FY27," said Aggarwal.

While prices of natural rubber increased on account of unfavourable weather in key growing regions such as Kerala and parts of importing nations in southeast Asia, the synthetic variety rose on account of a surge in crude oil product prices due to the West Asia war-related disruptions. Crude oil products are key inputs in the manufacture of synthetic rubber.

With disruptions in energy output and movement amid the ongoing West Asia war, benchmark Brent crude is hovering at around $105 a barrel for the January contract as against $65-70 when the conflict began.

India consumes 2.28 million tonnes of rubber, including natural and synthetic annually, of which 35.5% or 809,000 tonnes, is imported, according to the Rubber Board of India.

Replacement hit

Any tyre price increase now is unlikely to drive up automobile prices during the ongoing festival season, experts said. The first impact will be felt in the replacement market, where users replace their old tyres.

“Tyre price increases generally begin to be felt in the replacement market, or the aftermarket, so the first impact is there. The vehicles for the festive season would have largely been dispatched, which will come in full swing in the coming weeks. So, festive season prices for vehicles are unlikely to rise,” said Ashim Sharma, senior partner and business unit head at Nomura Research Institute (NRI) Consulting and Solutions, India.

Replacement tyres make up around 50% of India’s total annual sales, which reached 214.6 million units in FY26, while tyres fitted on new vehicles make up 25%, and exports comprise the remaining 25%, according to an August 2026 note by Crisil Ratings.

The tyre price hikes come amid India's festive season, spanning September-December, when consumers typically go in for big-ticket purchases. The season contributes about 40% to India’s consumption each year, as per a 2025 study by financial services company Visa.

Queries related to the impending price hike emailed to tyre makers Apollo Tyres and MRF, and the Rubber Board of India on Monday remained unanswered until press time.

Small biz squeeze

Beyond tyre makers, the rubber price rise has also prompted smaller businesses manufacturing rubber products, including footwear, tyre tubes, pumps, valves and sports goods, to renegotiate prices in their contracts with buyers.

“The sharpest squeeze is on the small manufacturers of hoses, belts, footwear soles and automotive components who had agreed to a fixed price before rubber became more expensive,” said Vinod Kumar, president of the India SME Forum, which represents around 100,000 micro, small, and medium enterprises (MSMEs).

“Micro and small enterprises are, therefore, negotiating price revisions with buyers, reviewing how much rubber they hold, and looking for ways to reduce material wastage,” Kumar said, adding that rising rubber prices are “a solid reason” for smaller businesses to stagger purchases of readily available rubber grades, while keeping enough of a critical grade to meet a confirmed order.

Rubber dynamics

Nomura's Sharma said if the price of synthetic rubber goes up, that of natural rubber, its alternative, will also rise, indicating the link of crude oil prices with inflation in natural rubber prices.

However, natural rubber is witnessing issues of its own, with production declining in key producing regions, and putting pressure on prices.

“Climate change has become a major challenge for rubber production, as rising temperatures and changing weather patterns continue to affect its cultivation,” said Jose Kutty Antony, a rubber farmer and proprietor of Thulumpanmakel Rubber Nursery in Kottayam.

“These environmental changes have significantly impacted rubber output, potentially contributing to a decline of around 30–36%, creating serious concerns for rubber farmers and the industry,” he said.