5 major warning signs for the tire industry in 2025

4 days left to 2025!

However, the New Year's Eve atmosphere in the tire industry is much more bland than in previous years.

The New Year's Eve price increase in 2022 was much more low-key in 2023.

The New Year's Eve champagne party in 2023 was not held in 2024.

The blandness of the New Year's Eve in 2024 reflects the anxiety of global tire companies about 2025 - will sales be worse than in 2024? Will costs be higher than in 2024? Will trade barriers be higher? In the new round of reshuffle, am I in or out?

01 Prices continue to soar
According to incomplete statistics, as of December 25, the number of price increase notices for 2024 has exceeded 150. Tire prices have gone crazy!

But what is more terrifying is that the price increase trend will continue in 2025.

The reason for the price increase in 2024 is the rising prices of natural rubber and synthetic rubber. In September 2024, the price of natural rubber once rushed to 20,000 yuan per ton, setting a price ceiling in the past five years.

Although the price of natural rubber fell slightly in October, its price at the end of December was still around 18,000 yuan per ton. Since mid-December, the main producing areas of natural rubber have begun to enter the harvesting period one after another. The reduction in supply may activate the price change of natural rubber, which also means that the price of natural rubber may return to the crazy 19,000 yuan per ton in 2025.

As for synthetic rubber, many companies reflected in their third-quarter financial reports that their prices have increased by 30% year-on-year. As early as November, two chemical product suppliers had already made a forecast of price increases in 2025.

The prices of the two most important raw materials that affect the cost of tire companies have already shown signs of price increases. If tire companies want to survive, price increases are currently the only way out. At the end of 2024, at least three tire companies have already forecast tire price increases in 2025.

02 Profits continue to be sluggish
Those tire companies that have not yet issued price increase notices are just waiting for an opportunity.

After completely squeezing out most foreign-funded tire companies from the competition for large tires in 2024, the starting gun for price increases for Chinese tire companies was handed over to China's leading tire companies - as long as they issue the first price increase notice, the first wave of price increases in the Chinese tire market in 2025 will be directly launched.

However, even if prices increase, it will be difficult for many tire companies to recover their profits to the high profit level 10 years ago. In 2024, few companies in the global tire industry did not see a decline in profits. Most foreign-funded tire companies attributed the decline in profits to a decline in sales, while Chinese tire companies attributed the decline in profits to rising costs. In fact, not only in tire factories, the decline in profits also exists in the tire market.

"Sales have not increased for a whole year." This is the distress of the owner of a large tire store. Because its store is located near the national highway, the sales of its stores can basically reflect the real demand of the current market. The market in 2024 is still very flat. In his store, there are banners for XX tires on sale all year round, hoping to boost sales through lower prices. "Even so (sale), sales did not pick up." Because of the strategy of selling off to increase sales, the profits of tire stores began to decline, and the gross profit margin of many tire stores is less than 5%. "To be honest, now we just make money from loading and unloading fees. We can't even pay the rent with tires alone." It is reported that the best shipping price of 22.5-inch truck tires by well-known brands in 2024 has fallen below 670 yuan. The profits of stores are so embarrassing, and the profits of dealers can be imagined.

More than 100 price increase notices were issued this year, but less than 10 of them came from dealers. The notices from dealers were really sent to the market, and the price increase notices from tire factories were sent to dealers, which also means that dealers did not pass on the price increase to the market, but stores passed on the sluggish market conditions to dealers. "Prices are rising at the top, but there is no sales at the downstream. The payment for goods has not been reduced, the inventory has not been reduced, the task has not been completed, and there is no profit."

In the eyes of many dealers, 2024 has become the most difficult year in their tire business. Of course, dealers have no hope for next year: "Don't hold out hope, it's a good thing if it doesn't get worse!" In the eyes of dealers, with the skyrocketing prices of raw materials, price increases by tire factories are an inevitable trend, so there will inevitably be higher costs in 2025 than in 2024; and selling off is also an inevitable trend. Even if the transportation market recovers next year, it is impossible not to sell off the inventory that has not been sold in the past two years. Higher purchase prices and lower prices will inevitably lead to a sharp drop in tire profits in 2025.

03 Exports, a lower proportion
However, the pressure on most dealers is still concentrated in the domestic market. However, the profits of its upstream tire factories will be "sandwiched" by both domestic and overseas markets.

Why are Chinese tire companies doing well in 2023? Relying on exports. The downgrade of global consumption has made the high-cost-effective tires of Chinese tire companies sell well.

However, as the economy gradually recovers, sales of mid-to-high-end tires have risen in the third quarter of 2024. More than one foreign tire company has reported a recovery in their sales in the European market in the third quarter.

In addition, the overseas construction of Chinese tire companies and their overseas localization operation strategies have also invisibly intensified competition among Chinese companies. In 2024, Chinese tire companies have more than 150 million tires put into production overseas and will be put into production in 2025.

In the first three quarters of 2024, the total import volume of full-steel and semi-steel tires in the United States was about 170 million, which also means that the increased tire production capacity of Chinese tire companies overseas alone is enough to meet the demand of the US market.

In addition, China's leading tire companies have begun to deploy tire production capacity in Europe and North America and conduct more efficient localized operations. There are not many opportunities left for small and medium-sized tire companies to expand overseas!

04 Market, Chinese and foreign games
In the overseas market, in addition to the game between Chinese tire companies, the competition between Chinese tire companies and overseas tire companies is also more intense. More and more Chinese tire companies want to expand into the primary market overseas.

The reason why Chinese tire companies have deployed in Mexico, Serbia, Spain and Morocco is inseparable from the actual environment where local automobile OEMs gather. If the overseas expansion 2.0 of Chinese tire companies is to solve the problem of trade barriers, then the overseas expansion 3.0 that has quietly started since 2019 is anchored on the supporting markets of Europe and the United States.

If the mid-to-high-end model market of major automobile companies can be gradually won by Chinese companies from 2025, it is just around the corner to take up more overseas first-level replacement market share. In the domestic market, the same thing is happening. After most foreign capital fled the competition in China's large tire market, it is doing its best to increase the production capacity of passenger car tires to maintain its share in the high-end passenger car tire market. However, Chinese tire companies are showing their strength and increasing their opportunities to appear by focusing on new energy vehicle supporting.

At the same time, multi-channel marketing opportunities also allow Chinese tire brands to be mentioned more in the market. The Chinese and foreign brand war in the tire market will become more intense in 2025.

05More unknown factors enter the tire war
In addition to traditional topics such as cost, price, profit, brand, and market share, more new topics will emerge in 2025.

In terms of tire technology, the penetration rate of SUVs and new energy vehicles continues to rise, and the performance of tires in terms of quietness and load-bearing capacity will also reach new heights...