Well-known tire manufacturers are fighting cheaper competition from China

The first snow on Polish roads is a signal for many drivers to change to winter tires. However, experts say that it is not precipitation but low temperature that should prompt us to replace tires. It is the world's leading tire manufacturer Michelin , which increased its revenues by 2% this year. The largest tire manufacturers must struggle with cheaper competition from China.

Tires are a market worth nearly a quarter of a billion USD

It is difficult to imagine the modern automotive market without tire manufacturers. The global tire market in 2022 was worth 245 billion dollarsin (2,3 billion tires sold). It is estimated that by 2028 it will increase by over 50%, reaching PLN 374 billion. dollars. The market is driven by the sale of new cars (including electric ones) and the need to replace worn tires in used cars. In many regions of the world, as in Poland, many drivers use two sets of tires - summer and winter. Although climate change may affect demand here, global warming may result in a shift in sales from winter tires to universal all-season tires.

The sale of new cars is of fundamental importance to manufacturers. According to the International Organization of Motor Vehicle Manufacturers (OICA), 2022 million were produced worldwide in 97. new vehicles, i.e. 2,4 percent more than a year earlier.

Tire manufacturers are important sponsors of Formula 1 races

This is a field for testing new, innovative solutions so that tires keep up with technological development in the automotive industry. More and more often, cars are equipped with sensors that constantly monitor not only tire pressure, but also temperature and road condition. Such analyzes allow you to increase safety and reduce tire servicing costs. Manufacturers are currently improving CAIS (Contact Area Information Sensing) technology, which involves building sensors into the outside of the tire so that the vehicle's electronics receives a message about the surface on which the vehicle is moving. Additionally, the growing popularity of electric and hybrid cars has created a demand for more efficient tires that provide a wider range.

A major challenge for manufacturers are price fluctuations of materials used to produce tires - the most important raw materials used are natural rubber, including rubber and crude oil. Oil price dropped from over 90 to approximately 80 dollars per barrel due to the decline in global geopolitical tensions. The price of natural rubber is currently approximately USD 1,5 per kg, approximately USD 0,5 less than in February 2021. The highest rubber prices were recorded at the turn of 2010/11, when the price exceeded USD 5 per kg. Its main producers in the world are China, Indonesia, Malaysia and Thailand.

However, large tire companies remain under pressure from cheaper tire manufacturers from China. They also have to cope with increasing environmental protection requirements.

Michelin is a world leader

The five largest tire companies in the world are: French Michelin , Japanese Bridgestone, American Goodyear, german Continental and the Japanese Sumitomo. In 2021, Michelin overtook Bridgestone to become the world's largest tire manufacturer. In the first 9 months of this year, the company increased revenues by 2%. (compared to the same period of the previous year) to EUR 21,2 billion. Sales expressed in euros could have increased more had it not been for the strong dollar throughout most of this period. Tire demand remained strong for most of the year, although down 10%. in September as a result of the strike of the United Auto Workers trade union in the USA. The company increased its forecasts year-end free cash flow (FCF) to EUR 2,3 billion from EUR 2 billion - mainly due to lower costs.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.