Natural Rubber Prices to Pressure Profit Margins; Credit Profiles Remain Stable

Tyre manufacturers in India are bracing for a second consecutive year of single-digit revenue growth as rising natural rubber prices and global economic challenges weigh on the sector. Revenue is forecast to grow seven percent to eight percent in the current fiscal year, driven by a three percent to four percent increase in both realisations and volume, according to an analysis by CRISIL Ratings. 

While this marks a significant improvement from the previous fiscal year, when revenue grew at approximately four percent, it falls short of the compound annual growth rate of 21 percent between fiscal years 2021 and 2023. 

Gradual price increases to offset cost pressures 

Tyre makers are implementing gradual price hikes to mitigate the impact of surging natural rubber costs, which account for nearly 50 percent of raw material expenses. Realisation growth is expected to be staggered throughout the year as manufacturers carefully balance price increases with market demand. 

Volume growth, projected at three percent to four percent, will be driven primarily by replacement demand rather than new vehicle sales. However, the limited ability to fully pass on higher input costs will strain operating margins, which are expected to shrink by approximately 300 basis points to 13 percent this fiscal year, down from 16 percent in the previous year. 

 “Domestic demand accounts for around 75 percent of the industry’s sales (in tonnage terms), while the rest is exported. About two-thirds of the domestic demand is from the replacement segment and the rest is from original equipment manufacturers (OEMs). This fiscal, replacement demand, mainly from commercial and passenger vehicles, will drive volume growth, while OEM demand is expected to rise only between one and two percent due to slow growth in commercial vehicle sales,” says Anuj Sethi, Senior Director, CRISIL Ratings.

Stable cash flows and balance sheets 

Despite these challenges, tyre makers are expected to maintain stable credit profiles due to robust balance sheets and prudent capital expenditure. Cash flow generation, though modestly affected, will remain substantial. Gearing and interest coverage ratios are projected to stay steady at approximately 0.3 times and seven to eight times, respectively, consistent with last fiscal year’s levels. 

A CRISIL Ratings analysis of the six largest tyre manufacturers, which together account for about 87 percent of the industry’s revenue, supports this outlook. 

Export growth weakens 

Export growth is forecast to remain muted at two percent to three percent for the year, reflecting sluggish demand in key overseas markets such as North America and Europe, which collectively account for 60 percent of India’s tyre exports. Geopolitical tensions and supply-chain disruptions have exacerbated the situation, leading to higher freight costs and extended transit times, further curbing export demand. 

Global shortages drive up raw material costs 

The sharp rise in natural rubber prices is primarily attributed to a global supply shortage caused by adverse weather conditions in leading producer countries like Thailand and Vietnam, which together account for approximately 50 percent of global rubber production. 

In addition to natural rubber, the cost of other critical raw materials, including nylon tyre cords, carbon black, styrene-butadiene rubber and polybutadiene rubber, remains volatile due to their dependence on crude oil prices. 

Outlook and challenges 

Looking ahead, tyre makers will likely continue to face pressures from raw material price volatility, original equipment manufacturer (OEM) demand fluctuations, potential changes in import duties, and the implementation of Extended Producer Responsibility regulations. 

Naren Kartic. K, Associate Director, CRISIL Ratings, says, “To support domestic tyre manufacturers, the Indian government has extended the countervailing duty on Chinese radial tyres for five years to ease competition. Plus, given the sluggish demand and pressure on operating margins, tyre makers are implementing appropriate price increases and prudent capital expenditure to ensure that capital efficiencies remain satisfactory. With capacity utilisation at  around 80 percent, tyre manufacturers rated by us are investing around INR 55 billion this fiscal, slightly lower than last fiscal, with a focus on necessary capacity enhancements and debottlenecking.”

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Apollo Tyres’ Chennai Plant has formalised a multi-institutional partnership through a Memorandum of Understanding (MoU) with five esteemed engineering colleges from Kerala, Odisha and Tamil Nadu. This strategic alliance is designed to fortify the nexus between industry and academia, with a focused objective of developing a robust, industry-ready talent pool to meet future sector demands. The collaboration represents a significant investment in the human capital pipeline, directly linking academic output with corporate needs.

The collaborating institutions in this forward-looking initiative are SASTRA University, SRM TRP Engineering College, JJ College Of Engineering & Technology, Ma'din Academy and Nilachal Polytechnic. The partnership’s framework encompasses a comprehensive suite of initiatives aimed at mutual development. For students, it provides a structured pathway to employment, including placement assurances during their final year and enhanced campus hiring opportunities. To bridge theoretical knowledge with practical application, the programme will facilitate organised industry visits to Apollo’s manufacturing facility, offering students firsthand exposure to modern production processes. Complementing this, a series of expert-led sessions, technical lectures and seminars will be delivered by in-house professionals from Apollo Tyres, ensuring the curriculum remains aligned with evolving industry practices.

This symbiotic engagement yields significant strategic benefits for all stakeholders. Students gain invaluable industry awareness and confidence, while academic institutions enhance their curriculum's practical relevance. For Apollo Tyres, the initiative enables the early identification and nurturing of prospective talent, effectively streamlining recruitment and fostering a positive perception of manufacturing careers.

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German chemicals group Wacker Chemie lowered its full-year outlook after third-quarter profit fell by nearly a quarter, hit by weak demand and intense competition from China.

The Munich-based company, which makes silicones and polysilicon for semiconductors and solar panels, reported earnings before interest, tax, depreciation and amortisation (EBITDA) of 112 million euros ($121.6 million) for the July-September period, down 23 percent from 145 million euros a year earlier.

Sales fell 6 percent to 1.34 billion euros from 1.43 billion euros, weighed down by lower prices and unfavourable currency effects.

The results were broadly in line with analyst expectations, which had forecast sales of 1.37 billion euros and EBITDA of 101 million euros, according to Vara Research.

Wacker swung to an operating loss of 20 million euros in the quarter, from a profit of 30 million euros a year ago, whilst net income turned negative to 82 million euros, compared with a profit of 34 million euros.

“The chemical industry is under pressure – worldwide, but in Europe in particular. The economic situation is tense, and market demand is weak. At the same time, the market environment is changing, and competitive pressure is high – especially from China. And this is something that we are experiencing at WACKER as well,” Chief Executive Christian Hartel said.

“Like many other companies, we had to lower our full-year forecast in the middle of this year. Even though we closed Q3 in line with market expectations, sales and earnings were again down year on year in almost all business divisions,” he said.

Wacker launched a comprehensive cost-cutting programme in October aimed at achieving significant savings in production and administration, with implementation planned to begin in the first quarter of 2026.

The company now expects full-year sales at the lower end of its previously forecast range of 5.5 billion to 5.9 billion euros, with EBITDA in the lower half of its 500 million to 700 million euro range. It also anticipates a negative net result for the year, significantly below the previous year.

The company’s silicones division, its most significant business, saw sales decline 7 percent to 673 million euros, whilst EBITDA fell 19 percent to 86 million euros. The polysilicon unit, which serves both solar and semiconductor markets, reported a 40 percent drop in EBITDA to 18 million euros, as low prices and exchange-rate effects offset strong hyperpure polysilicon performance in semiconductors.

Wacker’s workforce declined to 16,616 employees at the end of September from 16,724 three months earlier.

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Finnish tyre manufacturer Nokian Tyres said it would cut 80 permanent positions and temporarily lay off about 650 workers as part of measures to improve financial performance and operational efficiency.

The company has begun personnel negotiations affecting roughly 1,700 permanent white-collar positions across its global operations, including group functions and all business units.

The temporary layoffs will affect blue-collar and white-collar staff at passenger car and heavy tyre production facilities in Nokia, Finland, for up to 90 days per person. These measures could be implemented by the end of 2026.

The permanent job cuts, targeting white-collar roles, may take effect by late 2025, the company said.

Nokian Tyres employed approximately 4,400 people worldwide at the end of September, with 2,045 staff based in Finland.

The negotiations will commence immediately in line with local labour legislation in each country where the company operates.

The announcement comes as tyre manufacturers face pressure from volatile raw material costs and shifting demand patterns in key markets.

Nokian Tyres, known for its winter tyres and premium products, has been restructuring its operations following geopolitical challenges that affected its Russian production and sales.

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Capitalising on a period of significant growth, Nexen Tire is strategically introducing two new passenger tyres, the N’Priz S and the N’Fera Sport, through a comprehensive two-stage launch. This initiative represents one of the company's most substantial product introductions, designed to engage key audiences from media to consumers through immersive, hands-on experiences.

The launch commenced earlier this fall with an exclusive Ride N’ Drive event at the Illinois Autobahn Country Club. There, participants had the opportunity to personally evaluate the new tyres across a variety of driving conditions, including autocross challenges and highway simulations. This direct testing allowed them to assess critical performance attributes such as handling and comfort while also facilitating valuable interaction with Nexen’s own engineering and product development teams.

The campaign now advances to a broader stage, moving to the 2025 SEMA Show in Las Vegas. Nexen Tire America will host an extensive activation featuring a 240-foot booth where the N’Priz S and N’Fera Sport will be prominently displayed. The exhibit will include original equipment vehicles, motorsports trucks competing on Nexen tires and a dynamic schedule of live discussions with company leadership, technical experts and brand partners on the specially created Nexen Live stage. This platform will also serve to showcase the brand's latest progress in areas like tyre design simulation and electric vehicle development.

These two tyres are engineered to meet the distinct needs of different drivers, thereby broadening Nexen’s market reach. The N’Priz S is a grand-touring all-season tyre that is also EV-compatible, focusing on delivering a quiet, comfortable ride and reliable traction for daily commuting and long-distance travel. It incorporates advanced AI performance prediction and virtual simulation technology to optimise tread design and reduce cabin noise, alongside a specialised rubber compound aimed at enhancing tread longevity and overall efficiency.

In contrast, the N’Fera Sport is an ultra-high-performance summer tyre built for drivers seeking precision steering response and superior control in warm conditions. Its design prioritises direct feedback, confident wet-road braking and stability while still maintaining usability for spirited street driving. The N’Fera Sport is scheduled to arrive at dealers this fall, with the N’Priz S following in early 2026. Together, these launches underscore Nexen’s commitment to technological innovation and creating meaningful connections with the driving public.

Brian YoonSeok Han, CEO, Nexen Tire America, said, “Nexen Tire’s growth in the US is being fuelled by innovation and experience. We wanted people to feel what sets these new tyres apart, including how they handle, how they perform and how they represent our continued commitment to excellence. Ride N’ Drive gave us that direct connection with our partners, and now SEMA allows us to share that story on a global stage.”

Theresa Kapper, Director of Marketing for Nexen Tire America, said, “Launching the N’Priz S and N’Fera Sport through both Ride N' Drive and SEMA us to connect every piece of our story, from innovation and testing to excitement and scale. It’s about showing not only what these products can do, but what Nexen stands for as a brand. This rollout reflects the growth, energy and ambition driving Nexen Tire forward in the US market.”

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