Chinese tires in 2025: rising costs, rising tariffs, and falling demand
In 2023, Chinese tire companies won a great victory in the global tire market with their high quality-price ratio, and their profits have doubled several times!
In 2024, Chinese tire companies barely won despite a 30% surge in costs! Profits no longer doubled, and some tire companies even saw a decline in profits from the third quarter, and some tire companies had a gross profit margin of only 6% in domestic factories. However, due to the support of the performance in the first half of the year, the performance of most tire companies is still pretty good. However, some tire companies have begun to have "dark clouds" over their heads.
And by 2025, not only did the cost show no signs of regression, but the indiscriminate tariff increases after Trump took office, and the European region raised import barriers to Chinese tires, and the dark clouds over the tire industry became larger. For Chinese tire companies in 2025, there are crises everywhere and the road ahead is difficult...
High manufacturing costs
What is the biggest problem for tire companies in 2024?
Increased costs!
Such troubles still exist in 2025, and their presence is getting stronger.
As of February 6, 2025, the price of some types of natural rubber has once again hit 18,000 yuan per ton, and weather fluctuations in Asia are likely to continue to push up natural rubber prices.
Kraton Corporation, a synthetic rubber supplier, also announced at the end of 2024 that it would increase the price of all its styrene-butadiene-isoprene rubber (SIS) by 2,391 yuan per ton (US$330/ton) in 2025.
Carbon black, which had a relatively stable price in 2024, also began to rise because related companies wanted higher profits. Cabot, a US carbon black supplier, had already raised the price of specialty carbon black worldwide in December 2024.
In addition, transportation prices are also rising. In January 2025, domestic oil prices rose twice. At present, US crude oil prices have been soaring, so prices are expected to continue to rise in February.
However, these cost pressures are only visible surface pressures.
In fact, starting from 2023, tire companies are still bearing greater invisible price increases.
Additional costs are getting higher and higher
Due to the continuous pressure on environmental protection requirements for the tire industry in recent years, in order to meet the requirements of sustainable development, tire companies have begun to spend a lot of money to transform their factories.
In the technical transformation projects in 2024, in order to achieve sustainable development goals, most companies' technical transformation investment exceeded 100 million yuan, and some companies even invested nearly 1 billion yuan in technical transformation. And these investments directly affect the profit performance of tire companies in the early stage.
And this is just the beginning of investment, and the maintenance cost of these new equipment is also very high. Solar energy may save a lot of electricity bills, but the human and equipment maintenance costs required for investment are not low. Public data shows that after technical transformation and expansion, the annual growth rate of Chinese tire companies in terms of salary alone has reached 11%.
In 2025, with the implementation of more new expansion projects and technical transformation projects, the cost of tire companies will only climb higher.
In 2024, the gross profit of domestic factories of tire companies was generally suppressed to around 5% by costs, and a gross profit of less than 10% often means that tire companies are losing money. If such "negative profits" are maintained for a long time, it is impossible to guarantee the long-term development of the enterprise. What should we do? Raise the price!
In fact, in 2025, even if tire companies do not want to raise prices, they will have to raise prices? The global tire market is helping Chinese tires to "tear off the cheap label"!
Forced to tear off the cheap label
Trump came to power and directly imposed a 10% tariff on Chinese exports to the United States without distinction. Under such tariff pressure, Chinese truck tires that cost 820 yuan each may be directly raised to nearly 1,000 yuan each - from the cheapest tires in Asia to the fourth most expensive tires in Asia, and the price advantage has almost disappeared.
Of course, it is not only the United States that imposes heavy taxes on Chinese tires. On January 15, 2025, the new tariffs imposed by the European Union on Chinese truck tires will be between 21.12 euros (159 yuan) and a maximum of 78.90 euros (595 yuan) per tire.
The United Kingdom in Europe has considered imposing a double anti-dumping penalty of 1,000 yuan per truck tire on some Chinese tire companies.
Brazil, a major tire consumer in South America, announced that it would impose import tariffs of 16% to 25% on Chinese passenger car tires.
South Africa decided to impose tariffs on Chinese imports of passenger car tires and truck tires for motor vehicles.
India also decided to continue to impose anti-subsidy duties on China's products involved in the case for a period of 5 years, with a tax rate of 17.57%.
After 2025, the title of high-quality and cost-effective tires may be directly given to Southeast Asia. However, tire factories in Southeast Asia must not be too happy too early, as the tariff stick is also hitting Southeast Asia.
The United States added anti-dumping and countervailing duties on Southeast Asian passenger car tires in 2021, and directly added anti-dumping and countervailing duties of up to 22.57% on Thai truck tires in 2024.
At the same time, South Africa launched anti-dumping and countervailing penalties against Southeast Asian tires, imposing tariffs of up to 68%, 84% and 21% on the investigated products in Thailand, Vietnam and Cambodia, respectively.
If the global tire industry targets Southeast Asian tire factories again, then the high quality-price ratio advantage of Chinese tires will really be "empty all over the world".
Since Trump took office, relevant US agencies have issued a "warning" to global exports to the United States (even including Europe). Even if Chinese tires build factories in Europe and Africa, they will not be able to escape.
Overseas domestic demand is in a mess
Is it a "delaying tactic" to improve the domestic market? Don't even think about it! If Chinese tire companies can find a way out in the domestic market, why should they compete for overseas markets? In the first quarter of 2024, there were already reports that many Dongying tire factories had stopped supplying the domestic market.
Because selling tires in the Chinese market makes almost no money, Dongying's small and medium-sized enterprises simply give up rolling in the domestic market in order to "survive". According to the profit performance of listed companies, the export profits of Chinese tire factories are several times the profits of domestic sales.
Why is the domestic tire market so unprofitable? There is only one answer-there is too much tire production capacity. 15 years ago, China's annual tire production just exceeded 700 million; 15 years later, China's tire production has been close to 1.2 billion. Even though exports account for half of the total, the domestic market supply has almost reached the total production 15 years ago.
In the past two years, the demand for truck tires has been sluggish, and many terminal stores still have inventory for 2023. There is a large backlog of inventory, and tire companies cannot increase sales without price cuts.
The completely unprofitable price cuts have swept away foreign truck tire business, but this has also caused the Chinese truck tire market to completely lose its price indicator - raising prices for profits is almost impossible under the objective fact of declining demand in recent years.
And this crisis has also spread to the passenger car tire market. In 2024, Sumitomo Rubber has decided to reduce the production capacity of Dunlop Tire's Chinese factory by 12.6 million tires. There are too many Chinese tires in supply.
At the same time, the decline in the registration rate of new cars in Europe and the decline in the export volume of electric vehicles under European tariffs are also endangering the supporting performance of tire companies.
Several tire manufacturers have pointed out in their annual reports that the decline in new car sales in the fourth quarter has dealt a severe blow to their supporting businesses.
The dark clouds in the replacement and supporting markets have caused tire companies to not only reduce production in China, but tire giants are also reshaping their global production capacity layout in order to "save their lives".
Layoffs and factory closures, a chaotic tire market in 2025
Just over 30 days into 2025, the global tire market has already seen multiple rounds of factory closures and layoffs.
On January 9, 2025, Goodyear announced the end of truck tire production in Danville, even though the tire manufacturing history here is nearly 60 years old. 850 employees are expected to face layoffs by the end of 2025.
The purpose of this move is to achieve higher profits by reducing Goodyear's operating costs in North America.
Goodyear said that after the reshaping of production capacity in Europe, Southeast Asia and North America starting in 2024, its annual operating income in the Americas division will increase by $65 million starting in 2026.
In January, Bridgestone also announced the layoffs of 130 employees at its Des Moines tire plant and 290 employees at its Argentine plant.
Sumitomo Rubber not only cut production capacity in China, but also closed its only plant in the United States at the end of 2024. In Sumitomo Rubber's view, the cost here is too high.
However, Chinese tire companies have begun to deploy production capacity in high-cost areas around the world-North America, Europe, Africa, and Chinese tire factories are blooming everywhere. It is almost "contrary" to the decision of foreign-funded tire companies.
The top priority is to reduce costs and increase efficiency. Of course, "tonnage determines status" is an eternal hard truth in the tire industry, but under the "full encirclement" of cost crisis, tariff crisis, and sales crisis, do Chinese tire companies really need to speed up the expansion of production capacity?
At least for now, reducing costs and increasing efficiency and maintaining stable cash flow seem to be more resistant to pressure than increasing "tonnage"...
