Icra expects tyre sector revenues to grow by 7-9% in FY24

New Delhi: Ratings firm Icra on Thursday said it expects a revenue growth of 7-9 per cent for tyre industry in the current fiscal.

The rating agency pegs the domestic tyre demand growth at 6-8 per cent for FY2024, supported by stable growth in the replacement segment and sustained demand momentum in the OEM segment, Icra said in a statement.

The rating agency noted that it expects the demand momentum in the OEM (Original Equipment Manufacturer) segment to continue in FY2024 with an estimated growth of 8-10 per cent.

Replacement demand, which forms around two-thirds of tyre demand, is likely to witness mid-single digit growth in FY2024, it added.

"ICRA projects a 7-9 per cent growth in industry revenues for FY2024 with domestic growth outpacing exports," Icra Assistant Vice President and Sector Head Nithya Debbadi said.

Segment-wise, commercial vehicles shall benefit from the increasing traction in the infrastructure and construction segments, she added.

Strong underlying demand and preference for personal mobility will continue to drive passenger vehicles and aid in a recovery in the two-wheeler segments, Debbadi said.

"Nevertheless, tyre demand remains vulnerable to potential headwinds like adverse monsoons and its impact on rural demand, supply-related issues, general inflation, and further hardening in financing rates," she added.

While the El Nino occurrence and its potential impact on rural demand is monitorable, factors like improving economic activities, increasing freight movement, higher spend on infrastructure, absence of material price hikes, etc., shall support the growth in the replacement segment in FY2024, it stated.

On overseas shipments, ICRA noted that it expects export demand to be subdued for the next one to two quarters, although the long-term outlook remains favourable, given the strong acceptance of Indian tyres in the overseas markets.