JK Tyre & Industries expects to raise product prices by 11%-13% by the end of the first half of fiscal 2027 to offset rising input costs, according to the company's finance chief. As reported by Reuters, this represents a significant escalation from the 5%-6% price increase the company had planned in May. The hikes reflect pressure across the auto-parts sector after an oil price rally linked to West Asia conflict drove up the cost of petroleum-based inputs, energy and freight. Prices (of raw materials) have gone through the roof and for us, it went up by almost over 20%, significantly impacting business in the current quarter, CFO Sanjeev Aggarwal told Reuters on Wednesday.
Raw materials such as natural rubber, synthetic rubber, carbon black and steel make up about two-thirds of JK Tyre's expenses, according to CFO Sanjeev Aggarwal. According to Reuters, Aggarwal stated that prices of raw materials have gone through the roof and increased by almost over 20%, significantly impacting business in the current quarter. The cost increases are attributed to West Asia tensions, transport disruption and supply-chain constraints. As per Crisil Intelligence, tyre makers faced sharp increases in natural rubber, carbon black and synthetic rubber costs, with their margins estimated to have declined by 200-300 basis points during the quarter.
JK Tyre had rolled out price increases every month in the first quarter, with a small part of the planned rise implemented in June and the rest due in coming months, as reported by Reuters. The company, which counts leading car makers Maruti Suzuki India and Tata Motors among its customers, joins rivals Apollo Tyres and CEAT in raising prices to pass on higher expenses to customers. The move brings it into line with rivals who have also raised prices to offset the cost pressures. According to Crisil Intelligence, companies raised prices but could not pass on the full cost increase, with FMCG firms hiking prices by 4-10% and automakers, cement companies and airlines also charging more.
The price increases align with broader industry trends, as reported by Reuters. Top Indian car makers have also passed on costs to customers, while industry data released earlier this month showed vehicle sales rose 21.8% in June, signalling strong demand across passenger and commercial vehicles and giving tyre makers more room to pass on higher costs. According to Crisil Intelligence, revenue growth was broad-based enough to prop the aggregate number, with automobiles being among the biggest contributors to corporate revenue growth, estimated to have increased 22-24% year-on-year. However, aggregate earnings before interest, taxes, depreciation and amortisation (Ebitda) margin is estimated to have fallen to 19-19.5% from 20.2% a year earlier, even as revenue growth hit an eight-quarter high.
