Tire margins are falling on expensive rubber, companies are considering further price increases

New Delhi: A surge in natural and synthetic rubber prices, driven by erratic weather and war in West Asia, is squeezing margins at Indian tire makers and forcing them to consider further price hikes. And strong demand from automakers is also seen giving them some room to pass on higher costs, according to companies and industry experts.

Top tire makers such as Ceat and JK Tires saw their margins shrink due to rising prices of raw materials, including rubber. Domestic prices of RSS4 rubber rose by 62%. ₹from 300 kg ₹185 in November 2025, according to CMIE and Rubber Board data. Rubber makes up roughly half of the cost of manufacturing a tire.

JK Tires’ earnings before interest, tax, depreciation and amortization (Ebitda) fell 36% year-on-year to ₹343 crore in September, while profit after tax fell 73%. ₹60 million crowns. Ceat recorded an 11% drop in Ebitda. ₹$452 million and profit down 40% from a year ago ₹112 million.

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Ceat CFO Kumar Subbiah told Mint that the company will resort to further price hikes as previous price hikes over the past seven months have not offset the increase in costs for the company, which produced 4.5 million tires in FY26.

“We have gradually increased tire prices over the last six to seven months, but they have not fully offset the rise in raw material costs, hence our margins have come down. There is still a plan to move our prices further,” Subbiah said in an emailed reply to a Mint query.

Both Ceat and JK Tires flagged the hit due to spikes in input costs during their earnings calls last month. They said inflation in the prices of raw materials — rubber and carbon black, along with some chemical additives, silica and steel — continued to weigh on their margins.

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JK Tires CEO Anshuman Singhania said in an analyst call on October 26 that input costs increased by 9% sequentially and that the company sees another 4-5% increase in the third quarter, the ongoing quarter.

The company has grown its net sales, its income from tire sales, by 11-12% in the past six months and plans to increase it by 4-5% in the December quarter, said Singhania, whose company has a production capacity of 3.8 tires a year.

“Cumulatively, raw material costs have increased by 30% in the last six months due to inflationary pressures and supply chain constraints caused by the West Asian crisis,” said Sanjeev Aggarwal, Chief Financial Officer, JK Tyre.

“As macro commodity pressures persist in the industry, we continue to focus on disciplined price revisions, operational efficiencies and a higher share of premium value-added products to build resilience against input inflation,” Aggarwal said.

Posted by JK Tire ₹4,850 crore in revenue in the September quarter, up 20% year-on-year. “There has been very strong demand across segments for the GST 2.0 reforms in the last year and we expect the same to continue in FY27,” Aggarwal said.

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While natural rubber prices rose due to adverse weather in key growing regions such as Kerala and parts of importing countries in Southeast Asia, the synthetic variety rose due to a surge in petroleum product prices due to war disruptions in West Asia. Crude petroleum products are key inputs in the production of synthetic rubber.

Due to disruptions in energy production and movement during the ongoing war in West Asia, benchmark Brent crude is hovering around $105 a barrel for the January contract, up from $65-70 when the conflict began.

India consumes 2.28 million tonnes of rubber annually, including natural and synthetic, of which 35.5% or 809,000 tonnes is imported, according to the Rubber Board of India.

Replacement intervention

Now, any increase in tire prices during the ongoing festival season is unlikely to push up car prices, experts said. The first impact will be felt by the aftermarket, where users replace their old tires.

“The increase in tire prices generally starts to be reflected in the aftermarket or the aftermarket, so the first impact is there. The vehicles for the festive season would largely be dispatched, which will be in full swing in the coming weeks. It is unlikely that the prices of the vehicles for the festive season will increase,” said Ashim Sharma, senior partner and business unit head at Nomura Solutions Research Institute ands, India Consulting Institute (NRI).

Replacement tires account for around 50% of India’s total annual sales, which stood at 214.6 million units in FY26, while tires fitted to new vehicles account for 25% and exports account for the remaining 25%, according to an August 2026 Crisil Ratings report.

The increase in tire prices comes amid India’s festive season, which runs from September to December, when consumers tend to make big-ticket purchases. According to Visa’s 2025 study, the season contributes about 40% to India’s consumption every year.

Queries related to the upcoming price hike emailed to tire makers Apollo Tires and MRF and the Rubber Board of India on Monday remained unanswered till press time.

Small business squeeze

In addition to tire manufacturers, the rise in rubber prices has also prompted smaller businesses that manufacture rubber products, including footwear, inner tubes, pumps, valves and sporting goods, to renegotiate prices in contracts with buyers.

“The sharpest pressure is on small manufacturers of hoses, belts, shoe soles and auto components who agreed to a fixed price before rubber rose in price,” said Vinod Kumar, president of the India SME Forum, which represents about 100,000 micro, small and medium enterprises (MSMEs).

“Therefore, micro and small businesses are negotiating price revisions with buyers, checking how much rubber they hold and looking for ways to reduce material wastage,” Kumar said, adding that rising rubber prices are a “crucial reason” for smaller businesses to stagger purchases of readily available rubber grades while retaining enough critical quality to meet a confirmed order.

Rubber dynamics

Nomura’s Sharma said that if the price of synthetic rubber rises, so will the price of natural rubber, its alternative, suggesting a link between oil prices and natural rubber price inflation.

However, natural rubber is witnessing problems of its own, with production falling in key producing regions and putting pressure on prices.

“Climate change has become a major challenge for rubber production as rising temperatures and changing weather continue to affect its cultivation,” said Jose Kutty Antony, rubber farmer and owner of Thulumpanmakel Rubber Nursery in Kottayam.

“These environmental changes have significantly affected rubber production and potentially contributed to a 30-36% decline, raising serious concerns for rubber producers and the industry,” he said.