Tyre prices surge as natural rubber hits 20-year high

Natural rubber prices in India have reached a significant 20-year high, with domestic rates hovering around Rs 275-280 per kg. This surge has compelled tyre maker CEAT to enact a series of price adjustments. The company implemented an average 5.5% price increase in the replacement segment during the first quarter of the fiscal year, followed by 5.6% in July and an additional 2% in late August.

A further price hike of 1.5% to 2% is anticipated in September. CEAT expects to largely recover raw material costs in rupee-per-kg terms by the end of the current quarter. In the original-equipment-manufacturer (OEM) segment, prices saw a 10-11% improvement from July 1 due to quarterly pricing arrangements.

Demand has shown consistent strength for eight to ten consecutive quarters, primarily driven by OEM and international business, although price-sensitive commercial replacement tyres have experienced some softness. Capacity utilization for passenger car, two-wheeler, and truck-and-bus radial tires remains high at 90-95%, necessitating further capacity expansion through capital expenditure.