Tyre makers under pressure as rubber prices surge 33% in FY24: CRISIL report

Tyre manufacturers are struggling as the price of rubber has surged more than 33 per cent in the last five months of the financial year 2025, reported the news agency ANI on Sunday, September 29 quoting a CRISIL report.

The stretched supply and rising costs of natural rubber has created a challenging environment for tyre makers, said the report, as per the agency.

Natural rubber constitutes 20 to 40 per cent of weightage in the tyre manufacturing process, depending on the category of the tyre. The tyre industry makes up 80 per cent of natural rubber consumption in India, according to the news report.

Natural rubber prices, which remained subdued for the past decade, have now crossed the ₹200 per kg mark, as per the report.

The last rubber price surge was in 2011, when prices hit an all-time high after the global financial crisis. “Since the end of 2023, however, skyrocketing prices have again breached the ₹200/kg mark amid a raft of challenges -- and tight supplies of natural rubber have cast a long shadow on the industry even as steady expansion of the automobile industry and other major consuming industries keeps demand healthy,” according to the report cited by the agency.

What's fueling the rising rubber prices?

The imbalance in supply and demand, rather than short-term disruptions, is the cause of the latest spike, the report said. According to the report, the current surge in natural rubber prices is primarily driven by demand outstripping global production capacity, cited the agency.

Rubber production rose 35 per cent between 2011 and 2023 while demand surged 40 per cent. The widening gap has left the market struggling to meet the needs of tyre manufacturers, according to the agency report.

This price hike reflects structural issues within the natural rubber market, unlike the previous hike fueled by labour shortages or one-time shocks like the COVID-19 pandemic, cited in the agency report.

The current price reflects the mismatch between supply and demand, despite the steady expansion of the auto sector and other key industries, rubber supplies have failed to keep up, according to the report.

According to the report, in response to the prices, tyre manufacturers are faced with difficult choices. Many of them are attempting to pass on costs to consumers by increasing the tyre prices, but the extent to which this can be done is limited by competitive pressures in the market, said the agency report.

Additionally, the elevated costs of raw materials are squeezing profitability, creating a challenging situation for the industry, said the CRISIL report cited by the agency.