India’s tyre industry is bracing for a tough fiscal year, weighed down by sluggish demand, volatile raw material prices and muted export growth. Revenue is forecast to expand just 7-8 percent – supported by modest price hikes and a marginal rise in volumes – marking a second straight year of single-digit growth. However, operating margins are set to contract sharply as natural rubber prices remain elevated despite recent moderation. In a wide-ranging discussion, Anuj Sethi, Senior Director at CRISIL Ratings, unpacks the factors shaping the sector, from price pressures and replacement demand to global headwinds and evolving trade dynamics.

How would you characterise the current fiscal year for the Indian tyre industry, considering its challenges and opportunities?

With volume expected to grow just by about 3-4 percent due to sluggish demand, overall revenue growth will remain in single digit for the second straight year, this fiscal. On the other hand, high raw material prices, especially of natural rubber, rose sharply over the past 12 months and have only recently begun to moderate. To a moderate extent, tyre manufacturers are increasing tyre prices in the replacement market to offset the impact of higher input prices, albeit operating profitability will still be impacted this fiscal.

The report mentions 7-8 percent revenue growth this fiscal year, supported by a 3-4 percent increase in realisations and volume. What specific factors could push growth beyond this forecast, and what risks might undercut it?

While realisation growth due to price hikes being undertaken by tyre manufacturers is a certain given sharp increase in natural rubber prices, higher than projected volume growth could take the growth higher than expected. With about 2/3rd of the domestic demand

coming from replacement segment, and it being the primary volume driver, any significant decline in that demand can impact the growth forecast other way.

Given that replacement demand is the primary volume driver, how do you assess the longevity of this demand surge in the context of evolving consumer preferences and vehicle usage patterns?

The replacement demand is expected to sustain over the medium term driven by the strong automotive sales achieved in previous fiscals.

With operating profitability projected to drop 300 basis points, what contingency measures are tyre makers considering beyond gradual price increases to mitigate this impact?

The price of natural rubber, which constitutes about half of the raw materials, continued to surge sharply in the first half of fiscal 2025. However, ability to pass on this increase is limited due to modest volume growth. Small price hikes and continued focus at improving operating efficiencies on an ongoing basis is another way to offset the impact to some extent.

Natural rubber prices have been highly volatile, reaching record highs and then falling to around INR 170 per kg. What is your outlook for natural rubber prices in the near to medium term, and what factors will likely influence their movement?

The sharp rise in natural rubber prices is due to a global shortage caused by inclement weather in major producing countries such as Thailand and Vietnam, which account for about half of the global production. Going forward, increase in supply with improving hectarage and slowdown in global economies is likely to drive correction in international rubber prices. In the last couple of months, some moderation in natural rubber prices has happened.

China has a surplus in crude oil-derived raw materials, including carbon black and other chemicals. Do you anticipate this surplus impacting global prices for these commodities, and how might Indian tyre makers benefit or face challenges as a result?

Share of natural rubber in tyre manufacturing is 47 percent, while carbon black accounts for ~20-22 percent. Should carbon black prices remain under control, it will benefit domestic tyre manufacturers.

Export growth is expected to remain muted at 2-3 percent. How does the current geopolitical climate, including sanctions or trade restrictions, further complicate Indian tyre makers’ access to markets in North America and Europe?

Export growth is expected to remain sluggish due to challenging business conditions in US and Europe. However, certain segments like off-the-road tyres are beginning to see better prospects as stocks with dealers are moderating. This could help players with presence in the off-the road- tyre segment.

Exports to key markets such as North America and Europe are under pressure due to economic challenges and unviable operating costs, leading to plant shutdowns in regions like US, Europe and Israel. Is the Indian tyre industry at risk of facing similar challenges, or does it have structural advantages that mitigate these risks?

Indian players are better placed compared to some of the western peers due to comparatively lower cost of operations, though operating profitability has come under pressure this fiscal because of higher imported rubber prices. Also, Indian players have flexibility to supply in small batch sizes unlike Chinese peers, and hence this also works to their advantage, more prominently in higher margin segments such as off-the road tyres.

Have tyre makers explored new international markets or alternative trade routes to counter supply chain disruptions and higher freight costs?

Not really; to circumvent the difficult environment around the Suez Canal, vessels are going around the Cape of Good Hope, adding 2-3 weeks and additional freight cost on exports. Some of the costs are being shared with the customers.

The report references Extended Producer Responsibility (EPR) regulations. How significant is the financial and operational burden of compliance for tyre makers, and what progress has been made in addressing this?

Adoption of EPR regulations is not expected to have a very sizeable impact on profitability, though it will lead to investments in strengthening processes and in technology.

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Balkrishna Industries Ltd (BKT Tires), a global leader in off-highway tyre manufacturing, has appointed Craig Borman as Head of OTR at BKT USA. The appointment is in line with BKT’s long-term strategy through 2030.

Borman brings with him 20 years of experience across off-road equipment, tyres and rubber tracks. He will play a key role in leading BKT USA's OTR team and expanding the company's presence in this market while increasing awareness of the value and dependability of BKT's range of products.

Borman said, “I’m extremely excited to join the BKT family and to build off the successes that this team has already achieved. I look forward to engaging with our partners, determining how we can accelerate our mutual growth and working towards achieving BKT’s vision of being a recognised leader in the OTR segment.”

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The Supervisory Board of Continental AG confirmed a significant leadership transition during its meeting on 17 December 2025. Christian Kötz will be appointed as the new Chairman of the Executive Board and Chief Executive Officer, effective 1 January 2026. He succeeds Nikolai Setzer, who will step down from the Executive Board on 31 December 2025. Setzer's departure follows more than 16 years as a board member, including the last five years in the CEO role, and occurs by mutual agreement as the company reaches a pivotal point in its strategic evolution.

This planned change in leadership aligns with the substantial progress Continental has made in its transformation into a pure-play tyre company. Major structural milestones have been achieved, including the spin-off of Aumovio and the signing of an agreement to sell the Original Equipment Solutions (OESL) business area. Regarding the planned 2026 sale of ContiTech, internal preparations are largely complete. The market outreach phase has concluded, and a structured sales process is scheduled to begin in January 2026, setting the stage for the final step in the corporate realignment.

Kötz’s extensive background within the tyre business, dating back to 1996, positions him to lead this final phase. A member of the Executive Board since 2019, his previous leadership roles within the Tires group sector included responsibility for the passenger car tyre replacement business in the EMEA region, the original equipment and commercial vehicle tyre business units and global research and development for passenger car tyres. His many years of trusted collaboration with Nikolai Setzer are expected to ensure continuity during the transition.

Kötz will lead an Executive Board comprising several key figures. Alongside him and Philip Nelles, who has headed the ContiTech group sector since 2021, are Roland Welzbacher and Ulrike Hintze. Welzbacher joined the board in August 2025 and assumed the role of Chief Financial Officer on 1 October 2025. Hintze was appointed to the board on 1 July 2025, serving as Chief Human Resources Officer and Director of Labour Relations. This board will be responsible for driving the tyre business forward, completing the corporate realignment and, following the sale of ContiTech, integrating the remaining group functions into the tyre organisation.

Wolfgang Reitzle, Chairman of Continental’s Supervisory Board, said, “Nikolai Setzer has been instrumental in shaping Continental, realigning the organisation and paving the way for three strong, independent companies. For this, he has the thanks of the entire Supervisory Board as well as my personal gratitude. With this handover, we are consolidating responsibility for the tyre business, the realignment and the remaining tasks of the group functions in one role. Christian Kötz is one of the most distinguished managers in the global tyre industry. With his extensive experience and passion for Continental, we firmly believe he is the right choice to lead the company successfully into the future.”

Setzer said, “In recent years, we have succeeded in transforming a diverse portfolio of businesses into three strong, independent champions. After 28 years at Continental, now is the right time for me to hand over responsibility to Christian Kötz. I’m extremely grateful for the journey we’ve all shared and proud of what we’ve all achieved together. I firmly believe that the tyre business, ContiTech, Aumovio and OESL have a promising future ahead.”

Kötz said, “I would like to thank the Supervisory Board for its trust and am excited about this new responsibility. Continental has been my professional home for three decades. Together with the Executive Board team and all colleagues throughout the company, we will complete the realignment and continue the success story of our tyre business.”

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Following the 2025 General Assembly, Law Hieling has been elected to the Global Platform for Sustainable Natural Rubber (GPSNR) Executive Committee to represent the Manufacturer category. His 27-year international career at Michelin, encompassing roles in finance, commercial sales, distribution and his current leadership in natural rubber purchasing, provides a profound, ground-level understanding of the global tyre industry.

This extensive background has given him a clear appreciation for the intricate balance between commercial needs and ecological responsibility. He is committed to leveraging this perspective to help drive the collaborative, transparent and equitable solutions that are essential for a genuinely sustainable natural rubber value chain, benefiting both people and the planet.

Hieling said, “I look forward to contributing to the work of the Executive Committee in advancing responsible practices across the natural rubber sector.”

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Pirelli has confirmed that all five of its new slick tyre compounds will be used during the first three races of the 2026 Formula One season, beginning with Australia, China and Japan.

The Italian tyre supplier said the compound selections for the opening races mirror the approach taken in 2025, with nominations spanning from the hardest to the softest compounds to suit varying circuit demands.

For the season-opening Australian Grand Prix in Melbourne, scheduled for March 6–8, teams will have access to the C3, C4 and C5 compounds. The same combination in 2024 led to a two-stop race strategy using all three tyres. Earlier this year, however, variable weather conditions limited the use of slicks, with intermediate tyres required for much of the race.

At the Chinese Grand Prix in Shanghai, from March 13–16, Pirelli has selected the mid-range compounds: C2, C3 and C4. The 5.451-kilometre circuit, which was fully resurfaced this year, places average lateral and longitudinal loads on the tyres, with greater wear on the left-hand side of the car. Shanghai will again host the first sprint weekend of the season.

Suzuka, which hosts the Japanese Grand Prix from March 27–29, will require the hardest allocation, with C1, C2 and C3 nominated. The circuit is regarded as one of the most demanding on tyres. In 2025, low track temperatures and reduced graining allowed drivers to complete the race with a single pit stop, whereas higher thermal degradation in 2024 required at least two stops.

Drivers will arrive in Melbourne after an extended pre-season testing programme. The first test will take place behind closed doors in Barcelona from January 26–30, marking the first on-track running of the new tyres on 2026-specification cars. Each team will select three days of running during the five-day test. Two further tests will be held in Bahrain, from February 11–13 and February 18–20.

Pirelli said the use of all five slick compounds across the opening races will allow it to assess performance gaps between the tyres under competitive conditions, as well as their resistance to graining and overheating. The data will be used to inform compound selections for the European rounds later in the season.

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