Reasons for Tire Firms' Profit Drop
In recent years, there have always been people in the tire industry saying, "Business is getting harder and harder to do, and money is getting harder and harder to make."
This is not groundless. Just look at the listed tire companies and you will know that 80% of the companies have increased their revenue, but more than 50% of the net profits are falling, and some leading companies have been losing money for many years.
By 2025, the situation is even worse. In the first quarter, except for one company with a slight increase in net profit, the others are all falling. The industry profit fell from 5.3% in 2020 to less than 3% in 2023. What is going on?
Raw material prices keep rising, and costs are suffocating
The prices of raw materials for tire production, such as natural rubber and synthetic rubber, are rising like a rocket. In 2024, the price of natural rubber rose by 30% year-on-year, and synthetic rubber also rose by 19%. Triangle Tire said directly in its annual report that the price increase of raw materials is the main reason for the decline in profits.
Companies want to respond by raising the price of tires, but this price adjustment has a lag and cannot cover the cost of rising raw materials at all. Moreover, there is not much inventory of finished products, and the annual sales volume has slightly decreased, which puts greater pressure on profits.
Guizhou tires are not much better. In 2024, the gross profit fell by 9.27% year-on-year, and the gross profit margin fell from 22.01% in 2023 to 17.94%. The prices of natural rubber and synthetic rubber fluctuate, and the energy procurement price is also high. You must know that energy costs account for more than 30% of the total production cost. Isn't this profit margin greatly compressed?
The market competition is too fierce, and the price war is bloody. Now there are more and more companies making tires, and the market is so big. In order to grab business, everyone can only compete on price. In April 2025, Shandong tires began to reduce prices first, and it soon spread throughout the country.
The wholesale price of some brands of 205/55R16 tires has fallen below 100 yuan, which is lower than the production cost of some companies. The average profit margin of the industry has fallen below the warning line and entered a state of "zero profit" or even "negative profit".
Foreign brands such as Michelin and Bridgestone have taken nearly 80% of the profits in the high-end passenger car original equipment market with their technology and brands.
Domestic brands are okay in low-end markets such as truck tires, but they have been suppressed by foreign capital in the field of passenger car tires, forming a situation of "low-end surplus and high-end absence". Without the support of core technology and brand, domestic brands suffer more in price wars. No matter how much they sell, their profits cannot go up.
Too much production capacity cannot be sold out, and the imbalance between supply and demand pits companies. In some provinces with large tire production, companies are rushing to build factories, resulting in too much production capacity.
The capacity utilization rate of some parks is less than 60%, and a large number of equipment are idle, which not only wastes resources, but also makes the market oversupplied. If there are too many things to sell, companies can only cut prices, and profits will naturally decrease.
Moreover, with so much idle production capacity, companies have to spend money to maintain equipment and manage inventory. Once the operating costs are high, profits will be even more invisible. This is simply a vicious cycle.
Trade barriers block the way, and the road to export is not easy to go
Chinese tires account for a large proportion of the global market, and exports are an important sales channel for many companies. However, in recent years, trade barriers have increased, and exports have become particularly difficult.
The EU imposes high anti-dumping duties on truck tires, and the United States conducts anti-dumping and anti-subsidy investigations on Southeast Asian bases. Exports have been affected, and companies can only sell more products domestically. The domestic market competition is more intense, the price war is more fierce, and the profit margin is squeezed smaller.
In general, the decline in profits of tire companies is caused by the combination of rising raw material prices, fierce market competition, overcapacity and trade barriers.
To change this situation, companies must engage in technological innovation, build brands, and reasonably arrange production capacity. They must also find ways to deal with trade barriers and improve their own strength in order to survive and live well in this market.
