Ceat Can Become India's No.1 Car Tyre Maker In 3-5 Years' Time, Says CEO

Ceat Ltd. aims to become India’s largest car tyre maker by the end of this decade, a top executive said, but that’s easier said than done.

“We have very strong competition in this (passenger-vehicle) segment, very well-entrenched players. But if you look at our journey, about 12-13 years ago, we were at about 2.5% market share. We have climbed to 16%,” Arnab Banerjee, chief executive officer at the RPG Group company, said on the sidelines of a launch event in Mumbai on Wednesday.

“Climbing further is tougher due to the competitive intensity in the domestic market.” 

Still, “we see this (No.1 position) happening in a reasonably short period of time…it’s difficult to predict…it should be in 3-5 years time.”

India’s tyre industry, which contributes about 0.5% of the country’s gross domestic product, is expected to see a compounded annual growth rate of 8.71% between 2023 and 2030 to become a $25-billion market, according to industry estimates. India’s car market, already the world’s third largest, is seen as driving this growth on the back of growing demand for SUVs.

It’s this outsized demand for oversized cars that’s driving Ceat’s push into premium tyres.

On Wednesday, the Mumbai-based firm launched locally manufactured run-flat tyres and high-speed tyres with low-noise technology to cater to the premiumisation overdrive in the world’s third largest car market.

While run-flat tyres allow cars to continue a ride even after a puncture, the ZR-rated tyres can withstand speeds of up to 300 km/hour. The so-called CALM technology reduces tyre noise for a quieter cabin. These tyres will retail under Ceat’s brand of high-performance tyres called SportDrive.

Ceat is the first Indian tyremaker to dabble in these technologies.

“This (premium) segment makes up 8-10% of overall volumes. In the aftermarket, it’s even higher,” Banerjee said. “This segment will be a third of the industry in 3-5 years time.”

“With EVs coming in, the need for low-noise tyres is going to be even more salient. We want to be in a very strong position in this segment of tyres.”

These tyres are for exports as well, as that chunk of the revenue pie is margin accretive.

Italy, where Ceat had its beginnings as Cavi Elettrici e Affini Torino (Electrical Cables and Allied Products of Turin) exactly 100 years ago, is one of its largest markets. In fact, Europe brings in about a fifth of its overall revenue. That is expected to rise to 25-26% after synergies from its acquisition of a Michelin unit come into effect, Banerjee said.

“The goal is to draw a third of revenue from exports by 2030,” he said.

But are exports a hedge against margin pressures at home?

“Exports are an opportunity on several fronts. We get to understand the competing brands that are present globally (Ceat is the 15th largest tyremaker globally and aims to break into the Top 10). Tyres in Europe are totally different from what we sell in India, but the learnings can be applied here as well. Without that (knowledge), we wouldn’t have progressed as fast as we have in the domestic market.”

Still, the profitability question persists.

Ceat aims to grow its gross margins to 40-41% from 35-36% at present, on the back of small incremental price hikes from time to time, the CEO said. One such move is due for passenger-vehicle tyres by the end of March.

“The good news is that raw material prices are not going up, margins are stable, but we would like to grow our profitability nonetheless.”

But is there enough demand to drive OEM sales, or aftermarket?

India’s car industry is likely to see flattish growth in 2025, even as the commercial-vehicle space dips and the two-wheeler industry grows in fits and starts. Ceat is looking to exit some of the low-volume PV segments (compact cars) to focus on the premium (SUVs). Replacement demand, however, will offset any losses here with mid-single-digit growth.

That, Banerjee hopes, would be enough to deliver industry-beating growth in FY25. “We are committed to innovation and adoption of new technology to move up the premiumisation ladder,” he said. “To this end, you’ll get to hear more from us, from time to time.”