Leading tyre-makers have indicated a strong revival in the replacement market and an increase in supply to vehicle makers, a further sign of improving business environment amid the continuing fight against Covid-19 pandemic.

The tyre industry has been facing challenges on demand-side from Q2 of last fiscal and the industry revenues declined by about 15 per cent in Q4 FY2020. The Q1 of this fiscal was one of the worst quarters in the last decade due to Covid-19 and the resultant impact. However, with the gradual easing of lockdown and movement of people, the replacement segment has been signalling revival with improving tyre sales.

Healthy demand

For Apollo Tyres, revival in the replacement demand in the domestic market had been much higher than expected. Volumes in July reported single digit year-on-year growth.

“We are positively surprised by the demand momentum in the replacement segment, which led us to record our highest ever sales in the replacement market in India in the month of June. July has also been good across product categories in the aftermarket. We believe that we would have gained market share across categories in the replacement segment. This demand momentum is likely to remain strong going forward as well,” Neeraj Kanwar, Vice-Chairman & Managing Director, Apollo Tyres, told BusinessLine.

“We are seeing signs of recovery in the passenger car OEM (original equipment manufacturer) segment and there is a strong pick-up in the activity levels going forward,” he added.

OEMs suffer

With the relaxation in lockdown norms, JK Tyre has also achieved its highest-ever sales in the replacement market in June which resulted in a positive growth of about three per cent YoY basis.

Two- and three- wheeler tyre sales, too, did well during the quarter with a positive Ebitda for JK Tyre. However, the company’s OEMs volumes are still reeling from the impact of Covid-19, resulting in sluggish vehicle manufacturing.

Ceat has also said that its volumes in replacement market for tractor and truck tyres grew, while two-wheeler and passenger vehicle tyre sales started to pick up from June. The company’s plant utilisation level has come back to pre-Covid level, helped by healthy replacement sales.

Unlike other categories of auto components, tyre-makers have developed strong brand presence in the aftermarket which is completely independent of the vehicle OEMs.

“With gradual relaxations, the demand for tyres in June was strong, especially on the replacement side. OE demand de-grew by over 75 per cent given the muted vehicle demand and exports were affected amidst port related restrictions. Replacement segment is expected to fare well with improving rural support and pent-up demand. While tractors segment shall support the demand to an extent as it is relatively better placed, its share of overall tyre demand is less,” according to Subrata Ray, Senior Group Vice-President, ICRA.

The Ceat management told the Q1 conference call that tyre import restriction should help domestic tyre manufacturers in the coming months.

Overall, ICRA projects a 10-11 per cent fall in tyre industry revenues for the current fiscal due to softened domestic tyre demand.

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