Indian tyre maker posts robust margins and doubles down on electric vehicle segment as it digests the Sri Lankan acquisition

Sharad Matade

CEAT delivered a strong second-quarter performance, with revenues rising 12.2 percent year-on-year, even as the company navigates turbulent US tariff waters and integrates its recently acquired Sri Lankan off-highway tyre business.

The Mumbai-based tyre manufacturer reported standalone earnings before interest, tax, depreciation and amortisation (EBITDA) of INR 5.07 billion for the quarter ended September, with margins expanding to 13.7 percent. Net profit was INR 2.02 billion, a significant improvement from last year’s INR 1.22 billion.

“We’ve had a good quarter,” Managing Director Arnab Banerjee told analysts on an earnings call, noting that gross margins had climbed back into the company’s long-term target range of 40-42 percent after benefiting from softer raw material prices.

CAMSO Bet Takes Shape

The quarter’s headline event was CEAT’s completion of the CAMSO acquisition from Michelin on 1 September, a deal that positions the Indian manufacturer as a leading player in premium off-highway tyres. The company spent INR 12.32 billion in total for the transaction: INR 2.72 billion in equity, INR 7.02 billion in debt, and INR 2.38 billion for intangibles like trademarks and patents.

Chief Financial Officer Kumar Subbiah said the acquisition pushed consolidated debt to INR 29.44 billion by quarter-end, though debt-to-EBITDA remains comfortable at 1.8 times and debt-equity at 0.64 times. “We have enough leverage to provide necessary growth capital going forward,” he assured investors.

The company has historically maintained conservative financial thresholds, preferring not to exceed debt-to-EBITDA of 3 times or debt-equity of 1 time at peak levels. Although it has never exceeded INR 21 billion in absolute debt before, management is confident in the current INR 30 billion debt level, given the growth opportunities ahead.

The Sri Lankan plant currently operates at 50 percent capacity utilisation, offering significant upside potential. However, CEAT will not gain full control of the value chain for another five to six quarters, as it continues purchasing semi-finished goods from Michelin while setting up upstream mixing and calendaring equipment.

“There have been no surprises based on one month of operation,” Banerjee said, adding that the business is progressing well and remains on track to be margin-accretive in the medium term.

Aggressive Investment Programme

CEAT is in the midst of a substantial capacity expansion across multiple facilities. The company spent INR 1.85 billion on capital expenditure during the quarter, bringing the first-half total to INR 4.15 billion. Management expects full-year capex of around INR 10 billion, excluding CAMSO acquisition costs.

The investment breakdown reveals strategic priorities: INR 1 billion was allocated to research and development, information technology, plant maintenance and moulds. Another INR 0.50 billion is being used to expand truck-bus radial tyre capacity towards 2,000 units, an ongoing multi-year project.

The Ambernath plant expansion absorbed INR 0.70 billion, while the Chennai factory received the largest share at INR 1.60 billion for passenger car downstream operations and motorcycle scooter production. Debottlenecking initiatives across facilities accounted for INR 0.40 billion.

“Expansion projects are progressing as per plan,” Banerjee said, adding that overall capacity utilisation stands at 80-85 per cent currently.

Additional investments are planned for Sri Lanka to install upstream equipment at the CAMSO facility, enabling the company to stop purchasing semi-finished goods from Michelin and control the entire manufacturing process.

Tariff Turbulence

The company faces mounting pressure in the US market, where 50 percent tariffs on off-highway tyres have nearly halted exports. CEAT’s sales of off-highway tyres to America slowed to “practically zero” by quarter-end, though passenger car and truck-bus radial exports continued.

For passenger and truck-bus radials, the 25 per cent tariff applies uniformly across countries, leaving India at no disadvantage. CEAT is partially absorbing the impact while gradually passing costs to customers over the next two to four quarters.

The CAMSO operation in Sri Lanka faces a 20 per cent duty on US exports, with roughly half of that tariff currently being absorbed. “We expect CAMSO also to pass on the full impact of tariffs in maybe two to three quarters,” Banerjee said.

Despite the low base, CEAT’s management remains sanguine. “Our stake in the US market is still very low, so the overall impact on our growth and profitability was not very material,” Banerjee noted.

Domestic Boost from GST Cut

A positive development came late in the quarter when the Indian government cut goods and services tax (GST) on tyres from 28 to 18 percent, and on farm tyres from 18 to 5 percent, effective 22 September. The move is expected to boost demand in semi-urban and rural markets.

“There is significant benefit to customers,” Banerjee said. “The 10 percent duty cut works out to around 7-8 per cent on the selling price. For a truck tyre, it could be INR 1,500 per tyre, which is significant.”

CEAT passed the entire benefit to its channel partners and advised them to do likewise for end customers. The company isn’t contemplating any price increases, given softening raw material costs.

The GST announcement created a temporary dip in September, as buyers deferred purchases and trade down-stocked in anticipation. The replacement market, which had been growing at nearly double-digit rates, contracted during the month. However, momentum is expected to return strongly.

Segment Performance

Original equipment manufacturer (OEM) sales were the star performer, surging in the mid-20s as CEAT secured fitments on cars with larger rim sizes. International business grew in the high teens, while replacement business managed mid-single-digit growth despite September’s dip.

Two-wheeler tyres saw robust demand driven by rural markets, while the passenger car segment grew in mid-single digits. Farm tyre growth in the OEM segment reached the mid-teens.

International markets delivered particularly strong results, with mid-teens growth across key clusters in Europe, Africa and the Middle East. Europe, CEAT’s most profitable export market, saw strong traction in passenger car tyres. Brazil recorded good growth in two-wheeler tyres. Passenger and truck-bus radials now account for 65 per cent of exports, with CEAT claiming to be India’s leading passenger car tyre exporter.

Electric Vehicle Push

CEAT has established strong positions in India’s growing electric vehicle segment, holding a 30 percent share in the OEM passenger car and utility vehicle EV market and a 20 per cent share in the two-wheeler EV market.

“We continue to focus on product development for emerging vehicle sizes, and we have good respect and credibility amongst OEMs to get fitted on upcoming new models,” Banerjee said.

The company launched two innovations during the quarter: SecuraDrive CIRCL, a concept tyre made from 90 per cent sustainable bio-based materials, and RockRad, a premium mining tyre showing early promise.

On the digital front, CEAT became one of the first companies to deploy an agentic chatbot on its website, currently in beta, to personalise customer journeys. The company’s website traffic exceeded 1 million, with organic traffic up 19 per cent year-on-year. Leads for premium SUV users exceeded 30 per cent, while positive brand sentiment jumped 28 per cent in average interaction per post year-on-year.

Raw Material Relief

Raw material costs provided relief, declining 5 per cent quarter-on-quarter. International natural rubber prices held steady at USD 1,700-1,750 per tonne, while domestic prices softened towards import parity by quarter-end, dropping just over INR 10 per kilogram.

Crude oil hovered around USD 65 per barrel, at the lower end of its recent range, amid weak Chinese demand and ample supply.

“Taking into consideration current base prices and the impact of rupee depreciation in the last eight weeks, we expect raw material prices to remain at current levels in Q3,” Subbiah said.

Outlook

Looking ahead, management expects to maintain double-digit growth momentum while keeping margins steady. The third quarter typically sees revenue flatten or dip slightly due to the festival season and the onset of winter, which affects northern and eastern markets.

Replacement demand for medium- and heavy-duty commercial vehicle tyres should track GDP growth at mid-single digits, while two-wheelers should be around 7-8 per cent. At the same time, passenger cars remain soft, in the zero-to-low single digits.

“The GST change will be a positive factor for industry, especially in small towns and rural markets,” Banerjee said. “We also think we’ll arrive at some clarity on the US tariff situation sometime during Q3 or Q4.”

Doublestar Tires recently participated in Automechanika Dubai, presenting a range of products tailored to the specific demands of the Middle Eastern automotive aftermarket.

The company highlighted steady growth in regional demand for high-performance, wear-resistant tyres, driven by high ambient temperatures, desert terrain, the popularity of sport utility vehicles, and the increasing adoption of new energy vehicles.

At the exhibition, Doublestar showcased several specialised products, including desert all-terrain tyres, tyres developed for new-energy vehicles, and its NdGold truck and bus radial range.

The W01, designed for desert all-terrain vehicles, features a distinctive shoulder pattern intended to improve driving stability and safety. According to the company, its bionic wolf-claw tread design increases grip by 15 per cent while reducing rolling resistance, supporting off-road performance in demanding conditions.

Doublestar also presented the EV97, a passenger-car radial tyre explicitly developed for new-energy vehicles. The tyre is designed to accommodate the high-torque start-up characteristics of electric cars and incorporates a high-density belt layer and a reinforced crown belt layer. Its non-porous tread design is intended to balance appearance with safety performance.

In the commercial vehicle segment, the company introduced its NdGold truck and bus radial tyres. These use an ultra-wear-resistant compound designed to extend service life in high-temperature environments and improve overall vehicle safety.

Doublestar said its focus on differentiated and cost-effective products reflects its emphasis on innovation and supports its ambitions for further growth in global tyre markets.

Continental has been re-elected as co-chair of the Tire Industry Project until 2029, extending its leadership role in the global tyre industry’s main sustainability forum.

The company said it would continue to contribute resources and technical expertise, particularly in tyre and road wear particles, end-of-life tyres, sustainability assessment methods and supply chain transparency.

The Tire Industry Project (TIP) brings together leading tyre manufacturers to address environmental and sustainability challenges across the sector.

The German tyre company has been involved since TIP’s founding in 2005.

“We are honoured to have been re-elected as Co-Chair. TIP fosters collaboration within the tyre industry, and beyond, with academia and other partners,” said Christian Kötz, Head of Continental Tires and a member of the executive board of Continental AG.

“Founded 20 years ago, TIP brings together the largest tyre makers to tackle complex overarching sustainability challenges – such as advancing scientific understanding of tyre wear emissions.”

“Continental takes its sustainability responsibilities seriously. This includes our active involvement in industry-wide associations. TIP is ideally suited to reinforce Continental´s ambitious sustainability agenda,” Kötz added.

Dr Larisa Kryachkova, Executive Director of the Tire Industry Project, said Continental’s re-election reflected its long-standing engagement with the initiative.

“Continental has been committed to TIP since its foundation 20 years ago,” Kryachkova said. “Its re-election as Co-Chair is a testament to Continental’s strong expertise and spirit of cooperation.”

She said Continental would work alongside Bridgestone, Goodyear and Michelin, which together will help shape TIP’s strategic direction as co-chair companies.

Operating under the auspices of the World Business Council for Sustainable Development, the Tire Industry Project focuses on sustainability across the entire tyre lifecycle, from raw material sourcing and manufacturing to use and end-of-life management.

TIP brings together 10 leading tyre companies that collectively represent more than 60 percent of global tyre production capacity.

The year 2025 marked a significant chapter for VMI Group as it celebrated 80 years of operation, highlighting a landmark achievement for the international manufacturing firm. The company, which began as a modest workshop in Gelderland, Netherlands, has evolved into a worldwide operation serving the tyre, rubber and related industries across multiple continents.

The anniversary year was structured around the theme ‘Around the World in 80 Years’, featuring a series of celebratory events at major global facilities. Activities commenced with a virtual gathering connecting the entire organisation on 1 April. This was followed by large-scale in-person events in key locations including Yantai, China; Stow, United States; Itatiaia, Brazil; Leszno, Poland; and Vadodara, India. A particular highlight was a Family Day in Epe, Netherlands, which drew participation from over 3,000 employees and their family members.

The extensive campaign served not only to highlight the company's global scale but also to honour the collective contributions of its workforce. The celebrations were framed as a tribute to the employees and their families whose efforts over eight decades have shaped the company's unique and inclusive culture.

Underpinning the anniversary recognition is the company's longstanding commitment to innovation. Throughout its history, VMI has emphasised research and development, driving its growth with a continuous pipeline of new products designed for its global customer base.

Adding to the year’s milestones, VMI also received a gold EcoVadis award in 2025. This recognition underscores its standing as a leader in sustainability and environmental responsibility within the manufacturing sector.

Harm Voortman, CEO, VMI, said, “VMI is a global business, but we are also truly local in every country where we operate. We pride ourselves on being professional, rigorous and always working to the highest standards but also welcoming, open and friendly to everyone.”

Mike Norman, Chief Commercial Officer, VMI, said, “This great milestone has been reached and VMI is already looking forward to new challenges, new achievements and more celebrations- with innovation as the key to success in the future, just as it has been for the past 80 years.”

With a series of new product launches aimed at meeting diverse needs, CEAT aims to target new set of customers who are looking beyond just cost.

Mumbai-based RPG Group’s flagship company CEAT, one of India’s most recognisable tyre brands, is at the cusp of a transformation. From being known for durability and value-for-money tyres, the company is repositioning itself as a technology and sustainability leader – offering products that don’t just meet performance benchmarks but also embody environmental responsibility.

The company recently launched SecuraDrive CIRCL, a limited-edition road-ready tyre with up to 90 percent sustainable materials. This feat makes the company one of the few global players to have introduced sustainable tyre that is just not a concept but a ground reality.

For CEAT, the immediate priority is to educate consumers about sustainable tyres. With the launch of the SecuraDrive CIRCL, available in limited numbers (264 tyres), it is taking a deliberate step to spark conversations around eco-conscious choices.

Lakshmi Narayanan B, Chief Marketing Officer, CEAT Tyres, told Tyre Trends, “The first piece is customers becoming aware. This isn’t just a conceptual product – it absolutely matches the performance of a conventional tyre. The idea is to give consumers a clear-cut option and an opportunity to buy into the philosophy of sustainability.”

The company has introduced two variants for the CIRCL range – Circle 50 (50 percent sustainable content) and Circle 90 (90 percent sustainable content). The limited-edition approach, according to CEAT, is intentional. “We want consumers to make a conscious choice to understand the value of sustainability in a product they use daily,” he added.

The focus, then, is not only on selling a product but on creating a new mindset. As Lakshmi Narayanan B put it: “This is as much a product story as it is a brand story. We want consumers buying into it for the right reasons.”

FROM CONCEPT TO MANUFACTURING REALITY

While many companies experiment with prototypes or pilot runs, CEAT insists that its CIRCL tyres are not small-scale experiments. Instead, they are proof of manufacturing readiness at scale.

“When you can make 264 tyres using 90 percent sustainable content, you have the capability to scale it up to any number,” said Lakshmi Narayanan B, pointing to the three years of dedicated work on CIRCL within CEAT’s broader five-year innovation journey. “This is not a pilot run – it’s literally scale manufacturing. What you see today is the outcome of years of work,” shared Lakshmi Narayanan B.

The company has also leveraged its past innovations – such as run-flat tyres and CALM technology – to strengthen manufacturing processes. “Each innovation adds capability. Whether it is sourcing sustainable materials or manufacturing in a new way, we’re now confident of handling such things at scale,” he explained.

For CEAT, scale is not just about numbers but about readiness. “We have proven that sustainability and performance can co-exist. And when consumer interest builds, we are absolutely ready to scale this into mainstream adoption,” Lakshmi Narayanan B added.

EMBEDDING SUSTAINABILITY ACROSS VALUE CHAIN

The tyre major recognises that sustainability cannot be restricted to a single product line – it must cut across the entire value chain. Renji Issac, Senior Vice President – R&D and Technology, CEAT Tyres, pointed out that CIRCL is only the beginning. “All the learnings from this programme will flow into circular product development, extended producer responsibility (EPR) and end-of-life tyre management. Sustainability doesn’t stop at manufacturing – it extends to what happens after the product’s lifecycle,” said Issac.

This approach also means working closely with suppliers, including MSMEs and startups, to adopt new processes and materials. “Initially there was resistance; why should they change (suppliers)? But over time, they have seen the opportunity. Today, our entire supplier ecosystem is committing to our sustainability goals. It’s a challenge but also a transformation,” averred Lakshmi Narayanan B.

Issac added that part of CEAT’s role has been to handhold startups developing new materials, helping them scale their innovations into market-ready solutions. “Some of these materials come from startups, and it’s not just about us developing the product. We are helping them bring their products to market,” he explained.

This ecosystem development is crucial because CEAT believes that innovation is only as strong as its supply chain. “It’s not only about what we make in-house but how the entire chain contributes to sustainability,” said Lakshmi Narayanan B.

A STRUCTURED FIVE-YEAR ROADMAP

Looking ahead, CEAT is guided by a five-year roadmap that balances near-term launches with long-term capability building.

Issac explained that CEAT has developed “a very firm two-year plan on products that will hit the market. Beyond that, the next three years are about developing enabling technologies. For every product roadmap, there’s also a technology roadmap and a capability roadmap. This ensures we’re not just reacting to the market but anticipating it.”

This structured approach allows CEAT to introduce innovations faster while preparing for regulatory and consumer shifts globally.

Lakshmi Narayanan B stressed that the company wants to stay ahead of the curve. “Our intent is to be proactive, not reactive. Whether it’s a current trend or a future wave, we want to be in the right place at the right time,” he said.

The roadmap is part of CEAT’s larger R&D strategy, which has already delivered multiple first-to-market products in recent times. “Run-flat tyres, 21-inch ZR rated tyres, CALM technology and now the sustainable tyre – all of these are stepping stones in our long-term direction,” Lakshmi Narayanan B explained.

GLOBAL RELEVANCE WITH INDIAN CONSUMER FOCUS

Although CEAT operates in global markets, the company deliberately chose India as the first market for CIRCL. The rationale is clear: while European demand is often regulation-led, CEAT sees India as a consumer-driven opportunity.

“In Europe, sustainability is often about regulation. In India, we want it to be a conscious consumer choice. That’s why we launched here first – we know Indian consumers are asking these questions, especially EV owners and younger buyers. It’s an early adopter segment, but it will grow,” shared Lakshmi Narayanan B.

The CIRCL tyres will initially be available in 8–10 metros, targeting discerning consumers with compact SUVs and EVs. The company acknowledges that the products come at a premium but insists the value proposition lies in sustainability with uncompromised performance. “The promise is clear: sustainability and performance equal to any conventional tyre,” Lakshmi Narayanan B emphasised.

Looking forward, the company believes the CIRCL project positions it strongly for future regulatory shifts worldwide. “With capabilities like this, we can leapfrog in global markets when the time comes,” Lakshmi Narayanan B noted.

From CIRCL’s limited-edition launch to a broader five-year innovation pipeline, CEAT’s future focus revolves around three pillars:

1. Consumer-first sustainability – creating awareness and demand among discerning buyers, particularly EV owners.

2. Ecosystem transformation – enabling suppliers, startups and partners to align with CEAT’s sustainability vision.

3. Structured innovation roadmap – delivering near-term product launches while building long-term capabilities.

As Issac summed it up: “A sustainable tyre is also a low rolling resistance tyre. There’s no conflict between sustainability and performance. In fact, they move in the same direction.”

“It’s a long game, but we’re happy to take the first step. Future is always bright,” concluded Lakshmi Narayanan B.