CEAT Tires: Growth vs Profit Struggle

Recently, Indian tire giant CEAT announced its performance in the last fiscal year (April 2024 to March 2025). Among them, the performance from January to March 2025 was very bad. Under the pressure of costs, CEAT's profits declined in these three months.

From January to March 2025, the higher demand in the supporting and replacement markets brought CEAT a year-on-year sales growth of 11%; the passenger car tire supporting business ushered in a high sales growth of about 20% under the strong production and sales of local automobiles in India.

However, in the overseas market, under the influence of unfavorable factors such as "the continued increase in global uncertainties, tariffs and non-tariff barriers", CEAT's international business has suffered a certain blow. In the commercial vehicle tire market, CEAT's performance in the last fiscal year was also slightly inferior.

However, the manufacturer said that as the truck tire supporting business recovers after April 2025, it is expected that truck tire sales will achieve "single-digit" growth in the future. The financial report shows that sales in these three months increased by 14.3% year-on-year to 34.2 billion Indian rupees (2.865 billion yuan).

Although sales increased with the growth of sales, the crazy rise in raw material costs caused CEAT to experience an unimaginable decline in profits (earnings before interest, taxes, depreciation and amortization) in these three months.

The operating profit margin in the fourth quarter fell by 189 basis points year-on-year to 11.5%. In the end, CEAT's consolidated earnings for these three months were 3.9 billion Indian rupees (327 million yuan), a decrease of 1.8% compared with 4 billion Indian rupees in the same period last year.

However, CEAT said that this profit performance has been the result of improvement since 2024. In the first three months of 2015, CEAT improved its previous more sluggish profit performance through effective cost control and price increase strategies.

The financial report shows that the profit margin in the first three months of 2025 increased by 120 basis points month-on-month.

For CEAT, its profitability is expected to continue to recover from April 2025 to March 2026. The reason is simple: costs are falling. With the benefit of falling raw material costs, the tire maker expects its gross profit margin to increase from 37.5% to more than 40% in the new fiscal year.

In addition, its acquisition of Michelin's Camso off-road tire and rubber track business is expected to help profit margins and earnings growth this year.

At the end of 2024, CEAT acquired Michelin's Camso brand and a series of off-road tire manufacturing assets in Sri Lanka for approximately US$225 million (RMB 1.6 billion), hoping to expand its sales scale with the influence of the Camso brand.

As for the off-road tire business, which has performed poorly in the past year, CEAT said that the impact of the decline in supporting business on this business segment is gradually fading. According to CEO and Managing Director Arnab Banerjee, CEAT's off-road tire supporting demand is showing "signs of recovery."

After acquiring Camso's off-road tire business, its market share is expected to increase. At the same time, CEAT is full of expectations for the performance of the off-road tire replacement market in the coming year, and even believes that the growth of this segment will rely on the growth of the aftermarket for some time.