Michelin's H1: Sales & Exchange Hits
In the first half of 2025, Michelin Group, the "big brother" of the global tire industry, announced its performance, which looked a bit "stressful". In the past six months, its sales were 13 billion euros (about 109.29 billion yuan), a direct drop of 3.4% compared with the same period last year. Why is this happening?
In fact, it can be seen from this data that on the one hand, the global economic recovery is not strong, and on the other hand, multinational companies like Michelin are particularly difficult to operate in the current complex market environment. The two major "obstacles" that have the greatest impact are the decline in sales and exchange rate fluctuations.
From the perspective of sales, the structural adjustment of the global automotive industry and the weak macro-economy constitute the main pressure. As the core carrier of tire demand, the global automotive market performed below expectations in the first half of the year.
According to data from the World Automobile Organization, global automobile sales in January-June 2025 increased slightly by 1.2% year-on-year, a 2.8 percentage point drop from the same period last year. Among them, sales of traditional fuel vehicles fell by 4.5% year-on-year. Although new energy vehicles maintained a 15% growth, they have not yet completely filled the gap left by the decline in traditional models.
This structural change directly affects the rhythm of tire demand, especially the high-end passenger car tire market where Michelin is mainly deployed, which is more significantly affected by insufficient consumer confidence.
In the market segment, demand for commercial vehicle tires is also under pressure. After experiencing rapid growth after the epidemic, the global logistics industry has returned to normal. The slowdown in freight volume has led to a slowdown in the expansion of commercial vehicle ownership.
Coupled with the freight restriction policies implemented in some regions, the demand for commercial vehicle tire replacement has fallen by 3.2% year-on-year. The engineering machinery tire market was affected by the slowdown in global infrastructure investment, with sales falling by 5.1% year-on-year, further dragging down Michelin's overall sales performance.
Exchange rate fluctuations have become another challenge. As a multinational company headquartered in France, Michelin derives 65% of its revenue from markets outside the eurozone, and currency conversion differences have a significant impact on financial data.
In the first half of the year, the exchange rate of the US dollar against the euro depreciated by 4.3% year-on-year, the RMB depreciated by 2.8% against the euro, and the currencies of emerging markets such as the Brazilian real and the Indian rupee depreciated by an average of more than 6% against the euro.
This exchange rate trend caused sales denominated in local currencies to be significantly diluted when converted into euros. It is estimated that the exchange rate factor dragged down sales in the first half of the year by about 2.1 percentage points.
In terms of regions, the performance of the North American market is particularly obvious. The region is Michelin's largest overseas market, contributing 30% of global sales, but due to the weakening of the US dollar, North American revenue denominated in euros fell by 5.7% year-on-year, while actual sales denominated in US dollars only fell slightly by 0.8%, and the impact of exchange rates can be seen.
The Asia-Pacific market is also hit by the dual impact of exchange rates and demand. The Chinese market has brought structural opportunities due to the increase in the penetration rate of new energy vehicles, but the overall sales of passenger car tires still fell by 1.2% year-on-year. Combined with the depreciation of the RMB, the euro-denominated sales in the Asia-Pacific region fell by 4.1%.
Faced with dual pressures, Michelin has launched a multi-dimensional response strategy. The product side is accelerating its transformation towards high-end and low-carbonization. The sales volume of EV Primacy new energy special tires launched in the first half of the year increased by 35% year-on-year, and the supporting share of BMW, NIO and other automakers increased to 28%.
On the cost side, by optimizing the global supply chain layout, the proportion of natural rubber procurement from Southeast Asian factories was increased to 40%, effectively hedging the fluctuations in raw material prices. In terms of pricing strategy, a 3-5% price adjustment was implemented for core markets, which partially offset the impact of the decline in sales.
From an industry perspective, Michelin's performance fluctuations are universal. During the same period, leading companies such as Goodyear and Bridgestone all experienced sales declines to varying degrees, with an average industry decline of about 2.9%.
Michelin's 3.4% decline was slightly higher than the average, reflecting its sensitivity in the high-end market. However, it is worth noting that Michelin's high-end product gross profit margin remains at an industry high of 32%, significantly higher than the industry average of 25%, showing strong product competitiveness.
Looking forward to the second half of the year, with the continued repair of the global supply chain and the steady growth of demand for new energy vehicles, the tire industry is expected to gradually pick up. Michelin expects that after the new product volume and cost optimization measures take effect, the annual sales decline is expected to narrow to less than 2%.
For exchange rate risk, the company plans to control the impact of exchange rate fluctuations on full-year performance within 1 percentage point through foreign exchange hedging tools, while increasing local production investment in high-growth markets to fundamentally reduce exchange rate conversion risks. Against the backdrop of a complex and changing global economy, Michelin's mid-term report card is both a challenge and an important window for observing its strategic transformation.
