Tyres Caught In Cost Spiral

India's Tyre Industry Braces For Margin Pain Despite Demand Hope

By Shubhangi Bhatia

What?

India's tyre makers are caught in a margin squeeze even as demand holds firm. A sharp 20% surge in raw material costs over just four to five months, triggered by the West Asia conflict pushing crude past $100 a barrel and weakening the rupee, forced multiple rounds of price hikes across the industry.

Sanjeev Aggarwal, CFO of JK Tyre, told The Core that unlike past cycles driven mainly by natural rubber, this is a "multi-dimensional impact," with nearly every input, including synthetic rubber, carbon black, processing oils, and fabric, rising in tandem.

The clearest sign of strain is that fleet operators, faced with steeper prices, are choosing to retread old tyres rather than buy new ones, a stopgap that's denting replacement demand in the near term even as OEM orders hold steady. It is a small shift, but a telling one.

Industry experts suggest earlier rounds of cost volatility in the sector were largely driven by sentiment, but this time the pressure is showing up as an actual, physical squeeze on supply chains.

Why?

Crude derivatives make up 60-70% of tyre input costs, and even natural rubber, which is not directly crude-linked, tracks oil indirectly since it's globally substitutable with synthetic rubber. Moreover, India imports 35-45% of its natural rubber, leaving domestic prices exposed to global swings regardless of local supply.

Pass-through to customers is slow and uneven, as OEM pricing is indexed on a lag, while replacement pricing has no fixed schedule, letting competitive pressure delay relief indefinitely.

The same conflict also disrupted exports. CEAT's West Asia sales were "practically zero" in Q4, while Apollo reported similar export hits tied to logistics and energy uncertainty in Europe.

Why It Matters

Crude has cooled to around $72 a barrel, and Hemal Thakkar of Crisil Intelligence told The Core that "beyond Q1 the margins will only get better" since tyre makers won't roll back prices even as costs ease.

But the industry has been here before. In 2022-23, raw material costs spiked over 40%, and it took five to six quarters of margin pain to recover. So is this cycle really shorter, or just starting?

With JK Tyre betting on premiumisation, Apollo on scale, and replacement demand showing cracks through retreading, the real test is which strategy, and which company, survives the gap before prices catch up. That story plays out differently across the boardroom than it does on the shop floor.

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2.70 million barrels per day

That's how much oil India received from Russia in June, a record high, as refiners snapped up discounted Russian crude to offset supply disruptions from the Strait of Hormuz closure during the Iran war, Reuters reported.

This marked a sharp jump from roughly 2 million bpd in May. Russia now supplies over half of India's total crude imports, which held steady at 4.9 million bpd.

The Shift: The supply shock has prompted India's state refiners to reduce reliance on West Asian long-term contracts, favouring spot purchases and diversified trading arrangements instead, Bloomberg reported.

The Lead: During the crisis, Indian officials engaged in intense diplomacy with Gulf nations and Iran to secure energy flows. India is now exploring new suppliers like Guyana, Brazil, and the US, while planning expanded strategic reserves covering a month's demand.

Adani-MSC $1.4 Bn Port Deal

Switzerland's Mediterranean Shipping Company (MSC) Group will acquire a 49% stake in Adani Ports' Vizhinjam port for $1.4 billion, in what it said is the largest foreign private investment in India's domestic port infrastructure. MSC, the world's largest container shipping company, will make the investment through its unit Terminal Investment.

Overview: Vizhinjam port has a capacity of 1.6 million TEUs and is one of India's few natural deep-water ports. Located about 10 nautical miles from the busy East-West shipping route, it offers a significant geographic advantage connecting Europe, the Persian Gulf, and the Far East.

Adani Ports said the partnership is expected to boost cargo volumes and accelerate ramp-up at the Kerala-based port, though the transaction remains subject to regulatory approvals.

The investment reflects the company's broader strategy of deepening ties with global port operators to drive traffic and fast-track capacity expansion at Vizhinjam, one of its key growth hubs.

Setting: This marks Adani Ports' third partnership with MSC, following earlier joint ventures at its Mundra and Ennore ports.

RBI on Financial Stability

India’s central bank, the RBI, will remain alert to evolving external and domestic risks even though the Indian economy and financial system have shown notable resilience against significant shocks, Governor Sanjay Malhotra said on Tuesday in the foreword to the RBI's half-yearly Financial Stability Report.

Fast Facts: Malhotra said strong growth, low inflation, healthy balance sheets, and ample buffers had helped preserve macro-financial stability, and noted banks and non-banking financial institutions remain sound, backed by strong capital and liquidity positions, healthy profitability, low non-performing assets, and robust credit growth.

Stress tests showed financial institutions are well-positioned to withstand adverse shocks, and markets have functioned in an orderly manner despite global volatility, the report said.

Forecast: Malhotra flagged rising external shock risks from geopolitical conflicts and fragmentation, alongside AI-driven technological disruption, saying global financial stability risks remain elevated and the near-term outlook is uncertain.

He warned that inflationary pressures could push major central banks toward a hawkish stance, tightening global financial conditions, while high public debt, bond market fragilities, stretched valuations, and leveraged non-bank financial intermediaries could amplify future shocks.

The Great Dry Spell

India recorded its fifth driest June since 1901, with monsoon rainfall falling nearly 40% below the long-term average, according to weather department data. 

By the Numbers: The country received just 99.5 mm of rainfall during the month, against the normal 165.3 mm, making June 2026 the driest June in more than a decade. The delayed advance of the southwest monsoon slowed the sowing of key summer crops such as rice, corn, cotton and soybeans, raising concerns about farm output and rural incomes. 

Impact: The rainfall shortfall also intensified heat across northern India, with temperatures crossing 42 degrees Celsius in several areas.

As The Core recently reported, nearly half of India's farmland still depends on rainfall, leaving rural incomes highly vulnerable to prolonged monsoon disruptions and weather shocks. As well, Govindraj Ethiraj argues in his column The Take, that India can no longer treat water shortages as episodic events. Instead, policymakers and consumers may need to adapt to an era of persistent resource scarcity.

iPhone Secrets Exposed

Hackers have exposed Apple's tightly guarded iPhone supply chain after leaking sensitive files stolen from Indian supplier Tata Electronics. Reuters reported that ransomware group World Leaks posted documents on the dark web containing supplier lists, component details and photographs linked to Apple's upcoming iPhone 18 Pro models.

The Lead: The leaked files identify companies supplying key parts, including batteries, cameras and circuit board components. They also reveal internal code names and carry Apple's confidential markings. The hackers also leaked photographs from drop tests conducted at Tata facilities in India.

The Shift: Apple does not publicly disclose which suppliers make specific components, making the breach particularly sensitive. The breach comes as Apple accelerates its manufacturing expansion in India. Industry estimates suggest India will produce about 26% of global iPhones this year.

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