Chinese Tire Firms' OTR Choice

In the global tire industry, China proudly holds the title of world's largest producer, with a 35% market share. However, this glory belies lurking crises. In 2024, the annual reports of listed tire companies revealed a grim situation: nearly 80% of companies achieved positive revenue growth, but over 50% saw declining net profits. Some leading companies even languished in losses for six consecutive years.

Entering 2025, this trend of increasing revenue but not profits intensified. In the first quarter, with the exception of one company, which saw a slight 0.46% increase in net profit, the net profits of all other listed tire companies declined to varying degrees.

The root cause of this profit decline lies in the oversupply market. In 2024, China's rubber tire casing production climbed to 1.17 billion units, a year-on-year increase of 3.2%, but the industry's total profit fell 8.5% year-on-year to just 31.1 billion yuan, far below the overall level of the rubber industry. In this environment, the truck and passenger tire markets are mired in a fierce price war, ruthlessly squeezing companies' profit margins.

At this time, the only sector in the Chinese tire market that seems to offer a glimmer of potential is the off-highway (OTR) tire market, a ray of hope amidst the darkness, attracting the attention of numerous companies. But is this ray of hope or just a mirage? Many Chinese tire companies are hesitant and undecided about this decision.

The Attractive Prospects of the OTR Tire Market

OTR tires are primarily used in specific applications such as mining, construction, and agriculture. Market data suggests a promising future. The global agricultural machinery market has steadily grown. Over the past five years, global demand for agricultural machinery has grown at an annualized rate of approximately 5.5%. The Asia-Pacific region accounts for over 40% of the global agricultural machinery market, representing a vast market opportunity.

The strategic emphasis placed on rare earths by various countries, coupled with the robust demand for emerging minerals such as lithium, cobalt, nickel, and rare earths in the new energy industry, is strongly driving global mineral resource exploration and mining, undoubtedly injecting a "shot in the arm" into the over-the-road (OTR) tire market.

A research report indicates that the global OTR tire market will reach $8.79 billion (approximately RMB 62.5 billion) in 2024 and is expected to grow at a compound annual growth rate of 5.2% over the forecast period of 2024-2029. Other reports indicate that the global OTR market currently exceeds 180 billion yuan and is expected to grow to approximately 280 billion yuan by 2028.

Michelin and Bridgestone have previously reported that their off-highway tires have significantly higher operating profit margins than their passenger car and truck/bus tires. Michelin's financial report shows that its specialty tire revenue reached $6.99 billion in 2022, a year-on-year increase of 25.6%, with an operating profit margin of 14.94%, making it far more profitable than passenger car and commercial vehicle tires.

Tire companies at home and abroad have keenly sensed the lucrative potential of this market and are eager to enter the market. Zhongce Rubber, a leading domestic tire company, acquired Tianjin International United in 2021 with the intention of further expanding its over-the-counter (OTR) tire production capacity. Foreign tire giant Yokohama even invested 10 billion yuan to acquire the OTR tire businesses of Trelleborg and Goodyear, aggressively seizing market share.

Potential Risks in the OTR Tire Market

However, the market is volatile and fraught with uncertainties. A recent report by the foreign media outlet Tire Business has served as a wake-up call, signaling the risks faced by enthusiastic market participants. The United States, one of the largest importers of over-the-counter (OTR) tires, saw a significant decline in OTR tire imports in 2023, down 15.5% year-on-year. Total imports plummeted from $3 billion in 2022 to $2.54 billion in 2023.

This figure not only ended the OTR market's years of double-digit growth but also sparked market concerns about whether the OTR tire market has reached saturation. Tire Business analysis suggests that the double-digit decline in 2023 is most likely a result of a concentrated outbreak of overstock issues caused by the surge in the OTR market in previous years.

From a technical perspective, OTR tires, especially jumbo tires, present extremely high technical barriers. Their application scenarios are complex and diverse, placing stringent demands on material properties, tire profiles, and dimensions.

Jumbo tires, typically measuring over 49 inches and up to 63 inches, are extremely challenging to produce, creating insurmountable barriers to entry in terms of technology, capital, and customer base. In the global all-steel giant tire market, Michelin, Bridgestone, and Goodyear, three industry giants, have long held over 85% of the market share thanks to their strong financial resources, leading technological advantages, and powerful brand influence. It's no easy feat for domestic companies to carve out a share of this red ocean.

Looking at the market competition landscape, as more and more companies enter the OTR tire market, competition is becoming increasingly fierce. Many domestic companies have launched OTR tire projects, expanding production capacity at an astonishing rate.

With market demand still unclear, excessive capacity expansion is highly likely to lead to a new round of overcapacity, plunging the market into a vicious cycle of price wars and ultimately harming the interests of the entire industry.

Strategies for Chinese Tire Companies

Faced with the opportunities and risks of the OTR tire market, Chinese tire companies must maintain a clear mind and make prudent decisions. First, companies should conduct in-depth market research to gain a comprehensive and accurate understanding of the global OTR tire market's supply and demand, competitive landscape, and future development trends.

They should also closely monitor regulatory changes, economic development trends, and technological innovation in major markets to promptly adjust their development strategies.

In terms of technological research and development, companies must increase investment to overcome technical bottlenecks. They should actively recruit and cultivate high-end technical talent, build strong R&D teams, and focus on developing high-performance, highly reliable, and environmentally friendly OTR tire products.

This will enhance the technical content and added value of these products, strengthen their market competitiveness through technological advantages, and break the technological monopoly of foreign companies.

At the same time, companies must optimize their production capacity layout and avoid blindly expanding capacity. Based on their own technical strength, market positioning, and financial situation, they should rationally plan OTR tire production capacity and improve capacity utilization.

They should strengthen cooperation with upstream and downstream companies to build a stable and efficient industrial chain and supply chain system, reduce production costs, and enhance their risk resilience.

For companies with the necessary conditions, international expansion is a key way to increase market share and brand influence. By establishing production bases, R&D centers, and sales networks overseas to achieve localized production and sales, they can effectively circumvent trade barriers, better connect with the market, quickly respond to customer needs, and enhance their competitiveness in the global market.