The Indian tire industry is experiencing a typical structural squeeze rather than a cyclical ups and downs.
This is not a simple raw material price increase, but a ruthless survival of the fittest. 30% of midstream manufacturers have fallen into losses, which has become the most dazzling indicator in the industry’s “diagnosis”.
Judging from the “test results”, in 2026, the cost of natural rubber will account for as much as 41% of the total production cost. This round of price increases has directly caused the cost of tire manufacturing per ton to increase by 5.7% to 6.3%.
Not only that, the price of synthetic rubber exceeded that of natural rubber. Butyl rubber soared by 91.8%, carbon black increased by 17% to 21%, rubber accelerators increased by 55.6%, and the total raw material costs of leading companies soared by 12.8% year-on-year in the first quarter.
Faced with such cost pressure, the reactions of leading companies and small and medium-sized manufacturers are completely different.
With capacity utilization rates as high as 90% and stable gross profit margins, giants such as Apollo Tires directly announced a price increase of 6% to 8%, successfully passing on most of the cost pressure.
As for small and medium-sized manufacturers, which account for 30% of the total industry, the capacity utilization rate is generally less than 55%, and some are even lower than 30%, so they have no say in raising prices.
Their combined market share only accounts for 12% to 15%, and currently more than 40% have completely shut down.
The causes are internal and external. The external factors are the contraction of global natural rubber supply for six consecutive years, the production reduction due to extreme weather, and the increase in synthetic rubber and shipping costs driven by geopolitical conflicts.
But what really brought down small and medium-sized manufacturers was internal factors. The core cause was the complete loss of raw material pricing and reserve capabilities.
Leading companies can rely on long-term agreements to hold low-price raw material reserves for 45 to 60 days, or even up to 90 days, to calmly cope with price fluctuations.
However, small and medium-sized manufacturers adopt the “pick as you use” model, with a raw material storage cycle of only 7 to 15 days. When international rubber prices soar, there is no buffer space.
Another internal factor is the extremely fragmented and low-end industrial structure.
Different from the highly integrated vertical integration of rubber gardens and processing plants in Thailand and Indonesia, the Indian midstream market is extremely fragmented, with a large number of small and medium-sized manufacturers clustered in low-end bias tires, economical agricultural tires and other tracks. The technical threshold is low and homogeneity is serious.
They have neither upstream resource binding nor downstream brand bargaining power. Their main business is completely trapped in a price war, and their profits are already meager.
Comparing leading companies with small and medium-sized manufacturers together, the pathological characteristics are clear at a glance.
Apollo is spending 300 billion rupees to expand production. It has abundant cash flow and factories operating at full capacity. It is using its scale and technological advantages to devour the market.
Foreign investors such as Michelin and Bridgestone are also investing in the Indian market and investing in the construction of high-end tire factories.
This side confirms that the Indian tire market itself has broad prospects, but the growth logic of these “healthy bodies” is precisely based on the market share of small and medium-sized manufacturers being squeezed.
According to the research report of Huatai Securities and the judgment of the Indian Automobile Tire Manufacturers Association (ATMA), this round of natural rubber price increases driven by strong El Niño will last for 9 to 12 months.
If prices remain at high levels for more than 6 months, the Indian tire industry may clear about 15% of its small and medium-sized production capacity, and the loss will further expand by 10 percentage points in the third quarter.
The only possible variable is policy intervention. The Indian government has a precedent of temporarily canceling natural rubber import tariffs based on the cotton model, which can narrow the domestic increase by about 6% to 9%, but it cannot reverse the clearing trend determined by internal factors.
To put it simply, before the climate impact in the production areas subsides in the fourth quarter of 2026 and new rubber is launched, the cost-inverted noose will become tighter and tighter.
Those who can survive to the end are the leading players who hold long-term agreements, are bound upstream, have pricing power, and have full production capacity.
A large number of small and medium-sized manufacturers are essentially using the capital accumulated in the past extensive model to carry out a super raw material cycle that they cannot afford at all.
