Indian Tyre Industry Capacity Expansion Accelerates as Demand Supports FY27 Growth Plans

Leading tyre manufacturers in India are preparing for a new investment cycle beginning in FY27 as production facilities across major product segments operate near optimal utilisation levels. Companies including Apollo Tyres, CEAT, JK Tyre & Industries and Balkrishna Industries have announced significant capital expenditure programs aimed at expanding manufacturing capacity, improving automation, strengthening upstream operations and supporting sustainability initiatives. Despite increasing input costs and market volatility, the sector continues to invest aggressively to meet demand across replacement, OEM, export and premium tyre segments.

Capacity Expansion Continues Despite Cost Pressures

The industry's investment momentum comes at a time when tyre manufacturers are dealing with higher expenses related to crude-linked raw materials, logistics, freight and energy. Geopolitical developments in West Asia have intensified volatility across supply chains, forcing companies to implement price increases. While some of these costs are being passed on to customers, the transfer is expected to occur gradually, particularly within OEM contracts where pricing adjustments often lag cost movements.

Even with these challenges, tyre makers remain committed to expansion plans because existing facilities are operating at high utilisation rates and demand fundamentals remain supportive. Industry participants continue to see growth opportunities across replacement demand, vehicle production, exports and premium tyre categories, making capacity additions a strategic necessity rather than a discretionary investment.

Apollo Tyres Targets Major FY27 Investment

Apollo Tyres has announced capital expenditure of approximately ₹3,500 crore for FY27. Around 80 percent of the planned spending is dedicated to growth-oriented projects and capacity expansion initiatives. The company reported capacity utilisation of nearly 90 percent across its operations in India and Europe, highlighting the need for additional manufacturing capability.

Approximately ₹3,000 crore of the investment is expected to be deployed in India for truck and passenger vehicle tyre expansion projects. The remaining capital will support passenger car tyre capacity growth at the company’s manufacturing facility in Hungary. Management has indicated that strong demand trends continue across channels and product categories, supporting confidence in achieving full capacity utilisation in the coming years.

CEAT Maintains Expansion Plans with Flexible Capital Allocation

CEAT expects to invest between ₹1,300 crore and ₹1,400 crore in FY27 through a combination of growth and maintenance capital expenditure. The company currently operates with capacity utilisation levels ranging between 85 percent and 90 percent across major categories. Additional investments are also planned for the CAMSO business, particularly in upstream manufacturing assets such as mixers and calenders.

The company entered FY27 following a strong FY26 performance in which standalone revenue exceeded ₹15,000 crore. Although management expects demand to remain supportive across aftermarket and OEM channels, it has highlighted the impact of rapidly rising raw material prices. Input costs are expected to increase significantly during the first quarter, prompting further pricing actions across the replacement market.

JK Tyre Announces One of Its Largest Expansion Programs

JK Tyre has approved brownfield expansion projects for passenger car radial and truck bus radial tyre manufacturing at a total estimated cost of ₹4,980 crore. These projects will be executed in phases through 2029 and supplement an existing ₹1,130 crore expansion program already under implementation.

Together, the company's approved and ongoing investments total approximately ₹6,110 crore and are expected to raise truck bus radial and passenger car radial production capacity by about 24 percent. Management believes healthy growth in replacement and OEM markets will support the additional capacity while future EBITDA generation is expected to strengthen the company’s ability to fund the expansion program.

Balkrishna Industries Expands Beyond Off-Highway Tyres

Balkrishna Industries, widely known through its BKT brand, has approved an additional ₹2,000 crore investment program focused on capacity growth, infrastructure development, automation and sustainability initiatives. The company is expanding both off-highway and on-highway tyre operations while also strengthening carbon black production and commercial vehicle radial manufacturing.

The company has completed a new carbon black production line at Bhuj, increasing capacity to 265,000 tonnes annually, and expanded captive power generation from 40 MW to 64 MW. Further development work is underway to increase total carbon black capacity to 360,000 tonnes per year. Phase 1 of its commercial vehicle radial project has already been completed, while Phase 2 and passenger car radial tyre projects are scheduled for FY27.

Major Announced Capacity Expansion Investments

The following table summarizes the key investment plans announced by leading tyre manufacturers.

FY27 and Long-Term Tyre Industry Expansion Plans

Automotive Demand and Exports Support Investments

The investment cycle is being reinforced by strong vehicle demand. FY26 recorded the highest automobile sales across passenger vehicles, commercial vehicles, three-wheelers and two-wheelers in seven years. Passenger vehicle sales reached 46.43 lakh units, commercial vehicle sales stood at 10.80 lakh units and two-wheeler sales touched 2.17 crore units. These trends continue to support tyre demand from both OEM and replacement channels.

Exports have also become an important growth driver. India's tyre exports reached a record value of ₹27,312 crore during FY26, reflecting growth despite supply chain disruptions and elevated logistics costs. The United States remained the largest export destination, while Germany, Italy, Brazil and France continued to represent significant overseas markets. Strong export performance, manufacturing competitiveness and product development initiatives have encouraged continued investment across the sector.

Balancing Growth Opportunities and Margin Risks

Although long-term demand indicators remain positive, tyre manufacturers continue to face significant margin pressure from volatile raw material costs. Synthetic rubber, carbon black, processing oils, natural rubber prices, freight expenses and currency fluctuations all influence profitability. The combination of rising costs and gradual pricing pass-through creates a challenging operating environment in the short term.

As FY27 progresses, tyre manufacturers will need to balance two critical priorities. Capacity expansion remains essential because utilisation levels are high and demand remains healthy. At the same time, companies must manage escalating input costs while preserving demand momentum and profitability. The ability to execute expansion plans efficiently while navigating cost inflation will be a key determinant of industry performance over the next several years.

Frequently Asked Questions

Why are tyre manufacturers increasing capital expenditure in FY27?
Tyre manufacturers are expanding investments because production facilities are operating near maximum utilisation levels while demand remains healthy across OEM, replacement and export markets. Companies want to avoid capacity constraints that could limit future growth opportunities. Investments are being directed toward truck and bus radial tyres, passenger car tyres, automation, sustainability projects and upstream manufacturing capabilities. Strong vehicle sales, rising exports and positive long-term industry fundamentals continue to justify large-scale capacity expansion plans despite near-term cost pressures.

What is the biggest challenge facing the tyre industry in FY27?
The most significant challenge is the sharp increase in raw material and operating costs affecting tyre manufacturers. Rising prices of synthetic rubber, carbon black, processing oils, natural rubber, freight and energy are putting pressure on profit margins. While companies have initiated price increases, the ability to fully pass these costs to customers may take time, particularly in OEM contracts. Managing inflationary pressures while maintaining demand growth and executing expansion projects remains the industry's primary near-term challenge.