Budget 2026: How Union Budget Fuels Growth for CEAT Ltd. and Tyre Sector

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27, maintaining a strong emphasis on capital expenditure, manufacturing competitiveness, and infrastructure development. This budget has been widely welcomed by the industry, particularly the automotive and EV sectors, for its potential to stimulate demand and foster a robust manufacturing ecosystem. For CEAT Ltd., a prominent player in the Indian tyre industry, these budgetary provisions signal a period of sustained growth, driven by enhanced vehicle usage, accelerated EV adoption, and strategic support for domestic manufacturing.

Key Budgetary Impulses for the Auto Sector

The Budget 2026-27 has set a capital expenditure (CapEx) target of ₹12.2 lakh crore for FY27, a substantial increase from ₹11.2 lakh crore in BE 25-26 and ₹2 lakh crore in 2014-15. This significant allocation is expected to act as a major catalyst for industrial activities across various sectors, including automotive. Increased public spending on infrastructure, such as new dedicated freight corridors connecting Dankuni to Surat, operationalization of 20 new national waterways, and development of seven high-speed rail corridors, will directly translate into higher demand for commercial and passenger vehicles. This surge in vehicle movement and construction activity inherently drives the demand for tyres, benefiting manufacturers like CEAT Ltd.

Industry bodies like the Society of Indian Automobile Manufacturers (SIAM) have lauded the budget's long-term economic growth vision, particularly its focus on manufacturing and infrastructure. This sustained governmental push creates a predictable and supportive environment for companies to plan long-term investments and capacity expansions, such as CEAT's recently approved ₹1,314 crore CapEx for its Chennai plant to increase passenger car tyre production.

Boosting Clean Mobility and EV Ecosystem

The Union Budget 2026-27 provides clear signals for strengthening the electric vehicle (EV) ecosystem in India. The government has continued the basic customs duty exemption on capital goods used for manufacturing lithium-ion batteries and extended the concessional duty on lithium-ion cells and their parts until March 2028. These measures are crucial for reducing input costs for EV manufacturers and battery producers, thereby making EVs more affordable and accelerating their adoption.

Furthermore, the allocation of 4,000 e-buses for Purvodaya states underscores the government's commitment to sustainable public transport. This directly contributes to the growth of the EV segment, where CEAT already holds a strong market position, including a 32% share in ePV and 12% in e2W OEM segments. The budget's focus on strategic sectors like semiconductors, rare earth minerals, and high-tech tool rooms also aims to strengthen the domestic supply chain for electronic components, which are vital for EV manufacturing. This policy stability and incentive structure are expected to further solidify India's position as a global hub for smart and sustainable mobility, benefiting tyre companies actively investing in EV-specific tyre technologies.

Infrastructure Development: The Road Ahead for Tyre Demand

The budget's sustained emphasis on enhancing India's infrastructure, freight, and logistics networks is a direct boon for the tyre industry. Improved road connectivity, efficient freight corridors, and expanded logistics capabilities mean more vehicles on the road, covering longer distances. This naturally translates into increased wear and tear on tyres, driving demand in both the original equipment manufacturer (OEM) and replacement markets.

CEAT's Managing Director and CEO, Arnab Banerjee, highlighted that improved infrastructure and logistics networks would boost vehicle utilization, strengthening tyre demand across commercial and passenger segments. The development of Tier 2 and Tier 3 cities, identified as new growth centers, will also contribute to long-term demand by expanding economic activity and vehicle ownership beyond metropolitan areas. This holistic approach to infrastructure development ensures a broad-based demand stimulus for the tyre sector.

Strategic Support for Manufacturing and Supply Chains

The Union Budget 2026-27 adopts a nuanced trade strategy, selectively opening doors to foreign goods that bolster domestic supply chains while maintaining protection for emerging local industries. The budget proposes targeted tariff rationalization and calibrated duty cuts on raw materials and intermediate inputs. This measure is designed to lower input costs for domestic manufacturers, enhancing their competitiveness. For a company like CEAT, which relies on a combination of imported and local raw materials, this could help mitigate cost pressures, especially in light of rupee depreciation affecting import parity prices.

Moreover, the creation of a dedicated ₹10,000 crore SME Growth Fund and a ₹2,000 crore top-up for the Self-Reliant India Fund will strengthen the MSME sector. Given that auto component manufacturers often fall under MSMEs, a robust and competitive component industry is vital for the entire automotive value chain, including tyre manufacturers. The Automotive Component Manufacturers Association of India (ACMA) welcomed this focus, noting its potential to help the auto component industry remain competitive globally.

Rural Economy and Farm Tyre Demand

The budget also includes several initiatives aimed at boosting the rural economy and agricultural productivity. Schemes for coconut promotion, dedicated programs for Indian cashew and cocoa, and support for high-value crops like sandalwood and nuts in hilly regions are designed to increase farmer incomes. Additionally, the launch of Bharat Vistar, a multilingual AI tool integrating Agri-Stack portals, aims to enhance farm productivity and reduce risks for farmers.

These measures are expected to improve the purchasing power of rural households and stimulate demand for farm and two-wheeler tyres, a strategic growth area for CEAT. The company has a strong focus on expanding its reach in rural markets for these segments, and the budget's support for agricultural and rural development aligns perfectly with this strategy, promising sustained demand from these crucial markets.

CEAT's Strategic Alignment and Financial Outlook

CEAT Ltd. has demonstrated robust financial performance, reporting a consolidated net profit of ₹155.77 crore in Q3 FY26, a 60% increase year-over-year, on a revenue of ₹4,157.05 crore, up 26%. The company maintains its guidance for double-digit growth for the ongoing fiscal year. The Union Budget 2026-27's provisions are well-aligned with CEAT's strategic imperatives, including its focus on capacity expansion, EV tyre segment leadership, and international market penetration.

The budget's emphasis on policy stability and a long-term growth vision, as noted by industry leaders like Skoda Auto Volkswagen, provides confidence for sustained investment. CEAT's ongoing international expansion, particularly in Europe, and its focus on specialized segments like off-highway tyres, position it to capitalize on global demand stabilization and margin-accretive opportunities. The budget's supportive framework is expected to reinforce CEAT's competitive positioning and contribute to its double-digit growth trajectory.

Conclusion

The Union Budget 2026-27 presents a highly favorable environment for CEAT Ltd. and the broader Indian tyre industry. The government's unwavering commitment to capital expenditure, infrastructure development, and the promotion of clean mobility will significantly boost demand for tyres across various segments. Coupled with strategic support for manufacturing competitiveness and the rural economy, these measures are expected to drive both top-line growth and operational efficiencies for CEAT. The budget reinforces a stable policy landscape, enabling companies like CEAT to confidently pursue their expansion plans and contribute to India's economic transformation towards Viksit Bharat 2047.