Persistently high crude oil prices could eventually start weighing on the cost structure of India's tyre industry, as key petrochemical inputs linked to oil move higher. Industry experts say sustained firmness in crude could increase the prices of derivatives such as synthetic rubber and carbon black materials that form a significant portion of tyre manufacturing costs. Tyre makers may face pressure Petrochemical based inputs account for nearly two-fifths of the industry's raw-material expenses. In parallel, natural rubber another key component that contributes about 40-45% to the overall raw material basket has also been trending upward. If both trends persist, tyre makers could face pressure from both ends of the input cost spectrum once existing inventories purchased at earlier prices are exhausted, as per numerous industry players.

"Synthetic rubber is a crude derivative, and its prices generally track crude oil movements, albeit with some lag", says Srikumar Krishnamurthy, Senior Vice President and Co-Group Head, Corporate Ratings at ICRA Limited. He notes that natural rubber prices have historically also been influenced by crude trends, partly because India meets only about 55-60% of its domestic demand through local production, with the rest met via imports.

The tyre industry is the largest consumer of natural rubber in India, accounting for roughly 65-70% of total consumption. In developed markets, higher use of synthetic rubber in tyres driven by climatic and road conditions means crude-linked price movements can indirectly influence global natural rubber prices as well. Industry flags possible price pass through Automotive industry executives say the evolving geopolitical landscape is adding another layer of uncertainty. "Tyres are heavily dependent on petroleum derivatives such as synthetic rubber, so any sustained rise in global crude oil prices will inevitably push tyre manufacturing costs higher", says Uday Narang, Founder and Chairman of Omega Seiki Mobility.