A sustained rise in demand for tyres has made tyre producers line up capital expenditure of at least Rs 5,000 crore until the end of FY23, company officials said.
The planned spending is aimed primarily at adding manufacturing capacity, debottlenecking of factories as well as modernisation, upgrading technology and research and development.
The capacity expansion comes a little over a year after tyre-manufacturing plants closed for several weeks because of pandemic-related lockdowns and restrictions. The planned investments are aimed at meeting demand as Covid-19 abates and the economy revives, spurring demand.
Balkrishna Industries, the leader in off-highway, agriculture and industrial tyres, has committed capital expenditure of Rs 2,250 crore till FY23. This is the biggest capex proposed by a tyre company in India for the next 15-18 months.
Mumbai-based BKT is expanding manufacturing capacity at plants in Bhuj, Gujarat, and Waluj in Maharashtra. These initiatives will push BKT’s capacity by 26 percent to 360,000 MT per annum by FY23.
RPG Group flagship Ceat, which is India’s fourth-largest tyre producer, will spend Rs 1,700 crore till FY23, including Rs 700 crore this year itself.
A senior Ceat official told Moneycontrol that the capex is for a passenger car radial plant and for a truck and bus radial plant in Chennai, a two-wheeler plant at Nagpur, a specialty tyre plant at Ambernath, and a finishing line in the truck and bus radial plant at Halol.
New capacity
“We incurred a total capex of Rs 226 crore during the quarter (ended September), which includes approximately about Rs 150 crore towards our capacity expansion projects and our project capex outlook for the current year (FY22) still remains at around Rs 1,000 crore,” Ceat CFO Kumar Subbiah said.
Mumbai-based Ceat incurred capex of Rs 300 crore in the first half of FY22.
Apollo Tyres, India’s second-biggest tyre maker, spent Rs 1,100 crore in the first half of FY22 and plans a similar capex in the second half.
“Capex (for FY22) is in line with the guidance that we’ve given and there has been no change in that,” Apollo Tyres CFO Gaurav Kumar said on an earnings call. So, based on both the operations, the second half capex also will continue at a similar level, which would be completing the Andhra Pradesh greenfield project and some of the other maintenance capex and on digital initiatives.”
Goodyear India said it is investing in new capacity at both its India plants, although it declined to share investment details. The company expects strong, double-digit growth in volumes for the consumer and farm businesses. The replacement tyre business has grown exceptionally and the company has had to operate at optimal capacity.
“We continue to see robust demand across all product categories as India's economy regains momentum,” Goodyear India chairman Sandeep Mahajan said in response to a query from Moneycontrol. “Against this backdrop, our farm and consumer businesses delivered solid results, supported by expanded distribution and our strong OE (original equipment) position.”
Passenger car radial specialist JK Tyre & Industries, which maintained a tight leash on costs since the start of the pandemic, has started to invest again. While no new capacity will be added, the company has lined up some capex for freeing up plant processes.
“The company has initiated the de-bottlenecking programme of Rs 200 crore to be spent over next 2-2.5 years to unleash capacities,” JK Tyre CFO Sanjeev Agarwal said. “With this capex programme, the company will further strengthen the range of premium tyres and market presence to meet domestic and export demand.”
While supplies to vehicle manufacturers have been subdued due to issues such as the semiconductor shortage and poor two-wheeler sales, replacement tyre demand has been robust across segments. Tyre demand from the commercial vehicle industry has remained strong over the past several months following improved fleet utilisation.
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