In US-China trade war, Indian tyre makers could be collateral damage

US President Donald Trump’s administration on Wednesday increased its tariffs on Chinese imports into the country to 104%, in retaliation for China deciding to counter the US’ reciprocal tariffs with its own.

China last year exported rubber tyres worth nearly $1 billion to the US, which is the largest importer of rubber tyres.

While the US is a major market for Indian tyre makers, accounting for about one-fifth of their nearly $3 billion exports in 2023-24, Europe and Latin America are also key destinations.

Industry experts believe Indian companies will face higher competition in these markets if China and other countries affected by Trump’s tariffs decide to divert a share of their tyre exports from the US to other nations.

“With the imposition of US tariffs, the supply chain could witness disruptions along with price increase for consumers in the US,” said Shefali Joshi, senior analyst, India Ratings and Research. “The Indian companies might look for establishing manufacturing facilities in the US to cope up with the challenge.”

While CEAT Ltd and Apollo Tyres Ltd earned more than 10% of their revenue from exports in FY24, international sales accounted for nearly three-fourths of Balkrishna Industries Ltd’s topline. India’s largest tyre player, MRF Ltd, earned about 8% of its revenue from exports.

The companies did not immediately reply to Mint‘s queries.

“With the US’ tariff imposition, the exports of other countries, particularly China, are likely to be diverted to other geographies like Latin America and Europe, which are key areas for Indian exports also. This is likely to increase competition for Indian players in these countries,” Joshi added.

Dashed hopes

Anuj Sethi, senior director at Crisil Ratings, flagged another worrying factor for Indian tyre makers. “The overall demand for auto sales in the US is also likely to witness a slowdown due to rising costs from tariffs imposed on automobiles as well as components, which will in turn impact the demand for the tyre players as well.”

On 26 March, Trump announced a 25% tariff on all cars and components fully made outside the US. Domestic automotive companies, including tyre makers, were spared additional levies on 2 April when the US announced 26% reciprocal tariffs on Indian goods.

While India’s car exports to the US stood at just $8.9 million in FY24, the country shipped nearly a third of its overall auto parts exports of $21 billion to the US.

CEAT’s share price has fallen by nearly 8% since the reciprocal tariffs were announced on 2 April, while Balakrishna Industries has seen a nearly 9% fall in its stock value. Apollo Tyres has lost more than 5% and MRF about 2%. The BSE Auto index has declined by 5% in the same period.

CEAT, which recently acquired Canadian tyre brand Camso’s off-highway tyre business for $225 million to expand its global footprint, had been bullish about the US market. 

“The US will become a big market for us in the next 2 years’ time, with off-highway tyres leading the way, and now truck bus radials, and finally passenger car radials; it is not very high at present,” Arnab Banerjee, CEAT’s managing director and chief executive, had said during the company’s 16 January earnings call with analysts.

Even before the current turmoil in global markets, India’s tyre industry had been attracting additional investments from international players.

In November, Bridgestone India, a subsidiary of Japanese tyre maker Bridgestone Corp., announced an $85 million investment to expand its manufacturing capacity in Pune and Indore. The world’s largest tyre manufacturer earned about 44% of its revenue from the Americas in 2023, and about 2% from India.

“Our global teams are assessing the impact of the moves by the Trump administration,” said Rajarshi Moitra, executive director sales and marketing at Bridgestone India. “Long before the trade uncertainty, we had already termed India as a growth country and we will continue to invest here.”

Bridgestone expects India’s after-market tyre segment to grow at 6-8% over the next five years despite the uncertainty in the global markets.