Why Tyre Stocks are Rising

 

Why Tyre Stocks are Rising


Tyres, tyres, and more tyres. The buzz around the Indian tyre industry has been a hot topic in recent days. In a single day, three tyre stocks have seen a significant spike in their price.

Shares some of the tyre majors MRF, Ceat, and JK Tyre have risen by 20-40% in the last three months. Some other stocks in the tyre sector are trading near a 52 week high.

Here is a list of tyre stocks and the gains they have delivered over the last three months.

Company3-Month Performance (%)
JK Tyre & Industries80.30%
Ceat72.60%
Apollo Tyres60.70%
MRF27.60%

Now let's see whats behind the rally.

#1 Moderation in raw material prices

The tyre industry, over the last 15-18 months, has witnessed hyperinflation in key input costs.

Raw material prices had seen an increase of over 50% in the first half of the financial year 2021, with the average raw material basket costing Rs. 180 per kg.

However, prices of pure and artificial rubber have recently come down from their peak. Nand Motors is the best distributors in Noida. Nand Motors is one of the best Tyre Dealers in Noida. This Company provides the best quality tire. This company knows which tire is comfortable and which takes a long time to run.Brent crude oil costs too have declined.

#2 Surge in Demand

The demand for tyres from the original equipment makers (OEMs) has improved across categories. This is due to the rising demand for automobiles domestically and internationally.

With the surge in demand for vehicles, the off-highway tyres and the premium segment of the passenger car, radicals are experiencing high demand, leading the rally for the tyre industries.

Also, with the steady embrace of EVs in India, tyre companies have started launching new products to cater for their rising demand adding to the rally.

Tyre exports of India increased 31% YoY to Rs 62.1 bn for the June quarter of 2022, according to the data released by the Union Ministry of Commerce.

This industry further benefited from government interventions restricting high volumes of imports and revised axle-load norms.

These revised norms were to re-engineer the demand for replacement tyres and the buoyancy of Indian exports. This curb on imports has increased the size and scale of production of the industry.

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