Crude oil price hike sparks double whammy for tyre companies
A prolonged conflict is expected to hit earnings for tyre makers in 2026-27, say experts
- Mar 10, 2026,
- Updated Mar 10, 2026 3:33 PM IST
The spillover of the Israel-Iran war in West Asia has set off concerns of a double whammy for tyre manufacturers in India, as the spike in crude oil prices is set to make raw materials like synthetic rubber and carbon black expensive for an industry that was already seeing an uptrend in natural rubber prices. Soaring freight and insurance cost is also adding to the industry's woes as exports account a fourth of the tyre industry’s revenues.
Also read: US-Iran war: Fertiliser, cement, auto, tiles among sectors likely to be hit by fuel crisis
“On one side, crude-linked raw materials such as synthetic rubber and carbon black are becoming costlier, and on the other side nature rubber prices have also been trending higher over the past two. That's a double whammy for the tyre industry," says Poonam Upadhyay, Director, Crisil Ratings.
US-Israel-Iran war LIVE Updates
Close to 70% of the cost of tyres is from raw materials, and any price hike on the raw material side will have an impact, says Upadhyay. "The impact on EBITDA margins of tyre manufacturers will be much more significant is the war prolongs," she adds.
Crude-linked carbon black and synthetic rubber account for close to 25-30% of raw material requirement while natural rubber accounts for 40-45%, says Upadhyay.
About 60% of India's natural rubber demand can be taken care by domestic production. The country relies on imports from Southeast Asia and Europe for the rest 40%.
For tyre companies, it is easier to pass on the price hike in raw material costs to the replacement customers. However, the passthrough of costs is not that easy when it comes to auto original equipment makers (OEMs).
“If we look at domestic consumption and exports, 75% of tyres made in India are used locally while the rest 25% are exported. Within domestic, around 50% is replacement demand with the balance coming from OEMs OEM sales are typically contract-based, while the replacement segment is price-sensitive. If cost pressure persists, any price revisions that may be required are therefore likely to be introduced gradually across both OEM and replacement segments," says Upadhyay.
While the replacement demand will give them some breather, it will only help absorb a bit of pressure. Intense competition limits the tyremakers’ ability to fully pass on the cost inflation to consumers in a timely manner as price hikes usually happen with a time lag and are gradual, says Srikumar Krishnamurthy, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA.
The impact of the sharp spike in oil prices following the conflict in West Asia is a directional negative for the tyre sector, notes Krishnamurthy. “With a prolonged conflict and a consequent effect on oil prices and logistics costs, the overall impact of the same will be felt by the tyre makers in the ensuing quarters,” believes Krishnamurthy.
A prolonged conflict has the potential to constrain earnings for tyre makers in 2026-27, says ICRA’s Krishnamurthy.
Exports, which account for a fourth of the tyre industry’s revenues, have been hit hard as freight and insurance costs have soared following the Israel-Iran war.
The US is India’s largest export destination, accounting for 17% of India’s tyre exports, followed by Germany, Africa and Latin America.
“West Asia accounts for around 10% of India’s exports. With a prolonged conflict, tyre exports to the region can be affected,” says ICRA’s Krishnamurthy.
The spillover of the Israel-Iran war in West Asia has set off concerns of a double whammy for tyre manufacturers in India, as the spike in crude oil prices is set to make raw materials like synthetic rubber and carbon black expensive for an industry that was already seeing an uptrend in natural rubber prices. Soaring freight and insurance cost is also adding to the industry's woes as exports account a fourth of the tyre industry’s revenues.
Also read: US-Iran war: Fertiliser, cement, auto, tiles among sectors likely to be hit by fuel crisis
“On one side, crude-linked raw materials such as synthetic rubber and carbon black are becoming costlier, and on the other side nature rubber prices have also been trending higher over the past two. That's a double whammy for the tyre industry," says Poonam Upadhyay, Director, Crisil Ratings.
US-Israel-Iran war LIVE Updates
Close to 70% of the cost of tyres is from raw materials, and any price hike on the raw material side will have an impact, says Upadhyay. "The impact on EBITDA margins of tyre manufacturers will be much more significant is the war prolongs," she adds.
Crude-linked carbon black and synthetic rubber account for close to 25-30% of raw material requirement while natural rubber accounts for 40-45%, says Upadhyay.
About 60% of India's natural rubber demand can be taken care by domestic production. The country relies on imports from Southeast Asia and Europe for the rest 40%.
For tyre companies, it is easier to pass on the price hike in raw material costs to the replacement customers. However, the passthrough of costs is not that easy when it comes to auto original equipment makers (OEMs).
“If we look at domestic consumption and exports, 75% of tyres made in India are used locally while the rest 25% are exported. Within domestic, around 50% is replacement demand with the balance coming from OEMs OEM sales are typically contract-based, while the replacement segment is price-sensitive. If cost pressure persists, any price revisions that may be required are therefore likely to be introduced gradually across both OEM and replacement segments," says Upadhyay.
While the replacement demand will give them some breather, it will only help absorb a bit of pressure. Intense competition limits the tyremakers’ ability to fully pass on the cost inflation to consumers in a timely manner as price hikes usually happen with a time lag and are gradual, says Srikumar Krishnamurthy, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA.
The impact of the sharp spike in oil prices following the conflict in West Asia is a directional negative for the tyre sector, notes Krishnamurthy. “With a prolonged conflict and a consequent effect on oil prices and logistics costs, the overall impact of the same will be felt by the tyre makers in the ensuing quarters,” believes Krishnamurthy.
A prolonged conflict has the potential to constrain earnings for tyre makers in 2026-27, says ICRA’s Krishnamurthy.
Exports, which account for a fourth of the tyre industry’s revenues, have been hit hard as freight and insurance costs have soared following the Israel-Iran war.
The US is India’s largest export destination, accounting for 17% of India’s tyre exports, followed by Germany, Africa and Latin America.
“West Asia accounts for around 10% of India’s exports. With a prolonged conflict, tyre exports to the region can be affected,” says ICRA’s Krishnamurthy.