Trump tariff risk: CEAT figures out methods to salvage its $225mn Camso deal-OxBig News Network

“We are in talks with the Sri Lankan authorities. There is hope that the scenario will probably be resolved. However, we’ve our mitigation methods in place in case commerce offers don’t materialise,” Arnab Banerjee, managing director and chief govt, CEAT, advised Mint.  

India’s fourth-largest tyre participant acquired Camso, which will get almost one-third of its enterprise from the US, in December 2024 for $225 million (about ₹1,900 crore) in an all-cash deal from France-based Michelin group. In 2023, Camso posted a income of $213 million.

The acquisition gave the RPG Group flagship management over its two manufacturing amenities in Sri Lanka and over 40 international OEMs, together with these within the US. 

However, Trump’s 2 April announcement to impose 44% reciprocal tariffs on Sri Lanka soured the deal for the Mumbai-based firm. 

Though the US administration has paused the implementation of upper tariffs until 9 July, the approaching risk has pushed the corporate again to the drafting board.  

“At current, we do not need a lot publicity to the US. However, the nation is an recognized development marketplace for us,” Banerjee added.

The risk

Analysts have warned that the Camso acquisition will turn out to be an issue for the corporate if the Trump administration pursues the plan, and it is going to be key to observe CEAT’s mitigation methods.

The proposed tariffs will enhance import prices for US tyre prospects, which might shift demand to producers with vegetation within the North American area or these in nations that strike commerce offers with the US. 

“If the tariff scenario prevails, there will be vital threat to fifteen% of the general volumes (US bias tires) for the corporate (Camso),” wrote Rishi Vora of Kotak Institutional Equities, in a 1 May notice. “In that case, the rationale for the transaction turns into troublesome to justify.”

In 2024-2025, the tyre maker’s web revenue declined by 26% to ₹471 crore, whereas its income grew by 10% to ₹13,217 crore.

Its share value has risen by 17.88% for the reason that starting of 2025, as towards a 2% rise within the Nifty Auto.

The contingency plan

The North American market is a key vacation spot for the Indian tyre trade, accounting for about one-fifth of its almost $3 billion exports in 2023-24. Europe and Latin America are additionally key locations.

In 2024-25, CEAT obtained about 19% of its ₹13,217 crore income from exports, with its main markets in Latin America and Europe. However, the administration set its sights on the world’s largest tyre market in 2024.

“CEAT has entered twelve new geographies within the fiscal yr with plans to enter the world’s largest tyre market, the US, in 2025. This enlargement underscores {our capability} to supply the best-in-class merchandise to fulfill international necessities,” the corporate’s vice chairman, Anant Goenka, stated in his letter to shareholders in 2024.

Now, to salvage that ambition, certainly one of its mitigation methods includes the corporate shifting the manufacturing of tyres for the US market from Camso’s vegetation in Sri Lanka to its Indian amenities, whereas the Sri Lankan vegetation will produce tyres for the European market.

As of now, India, the place CEAT has six manufacturing vegetation with a capability of manufacturing greater than 140,000 tyres every single day, stands to draw reciprocal tariffs of 26% on the products it exports to the US. 

Tyre exports

Overall, the worldwide markets represent a big share of India’s prime tyre makers.

While Apollo Tyres Ltd earned round 13% of its income from exports in 2023-24, worldwide gross sales accounted for almost three-fourths of Balkrishna Industries Ltd’s prime line. India’s largest tyre participant, MRF Ltd, earned about 8% of its income from exports.

For the broader auto ancillary sector, together with auto components makers, exports to the US contributed one-third of the whole $21 billion exports in 2023-24.

Sona Comstar, which will get greater than 40% of its income from the North American market, highlighted in its earnings name on 30 April that 3% of its income will be impacted because of Trump tariffs.