Tire Industry: Chances & Challenges

In the current booming automotive market, tires, as a key automotive component, have a market performance that is closely linked to the industry's success and failure. In August, the national passenger car market sold 1.995 million units, a year-on-year increase of 4.6% and a month-on-month increase of 8.2%. Year-to-date, cumulative sales have reached 14.741 million units, a year-on-year increase of 9.5%.

This year, the cumulative growth rate of domestic auto market retail sales has continued to rise, from 1.2% in January-February to 11% in January-June. July-August showed a slowdown from a high base, consistent with the "low at the beginning, high in the middle, and flat at the end" trend predicted at the beginning of the year.

August retail sales reached a new high, increasing by 3.7% from the historical high of 1.92 million units in August 2023, demonstrating a gradually flattening growth trend. This automotive market situation undoubtedly presents numerous opportunities and challenges for the tire industry.

From a market demand perspective, the growth in auto sales has directly driven demand for original equipment tires. As new cars continue to be sold, demand for tires, as essential components, has also increased. The new energy vehicle sector is experiencing particularly rapid growth.

In the first half of 2025, China's new energy vehicle production increased by 41.4% year-on-year. Many tire companies are accelerating the development of tires suitable for new energy vehicles and collaborating on supporting products.

Zhongce Rubber has successfully entered Toyota's supply chain, supplying original equipment tires for the Toyota Bozhi 3X. It has also secured orders for several new energy vehicles, including the BYD Formula Leopard Titanium 3 and the Xiaopeng MONA. Linglong Tire has also successfully supplied tires for numerous new models, including the Geely Xingyuan, Nissan N7, Wuling Xiangjing, and Leapmotor B10.

This has enabled rapid penetration across the entire vehicle market, from economy to mid-range and high-end, and from traditional automakers to emerging car manufacturers. This demonstrates that tire companies are actively seizing market share in the competition for original equipment tires in the new energy vehicle market.

However, the original equipment market is only one part of the tire industry; the replacement market is equally important. With the continuous increase in vehicle ownership, the demand for replacement tires is also rising. However, competition in the current replacement tire market is extremely fierce.

The domestic tire industry remains plagued by structural overcapacity, with low-end products experiencing significant homogeneity. To compete for market share, some companies resorted to price-cutting strategies, leading to frequent price wars.

By 2025, the wholesale price of 205/55R16 tires for some tire brands had fallen below 100 yuan, significantly reducing the industry's average profit margin to zero or even negative profit. This vicious price competition not only harmed the interests of individual companies but also impacted the healthy development of the entire industry.

Regarding raw materials, tire production is highly dependent on them. Natural rubber, synthetic rubber, and carbon black are key raw materials for tires, and price fluctuations significantly impact tire companies' cost control. In the first half of 2025, due to factors such as drought in major producing areas in Southeast Asia and international capital speculation, the spot price of natural rubber rose sharply.

As a core raw material that accounts for over 30% of tire production costs, the price increase directly led to a decline in the gross profit margins of listed tire companies. In addition to natural rubber, the prices of raw materials such as synthetic rubber and carbon black also saw some increases, further exacerbating the cost pressures on tire companies.

Although natural rubber and synthetic rubber prices saw a slight increase in August, providing some support on the cost side, overall, the instability of raw material prices remains a major challenge for tire companies.

Chinese tire companies also face significant challenges in exports. The EU's imposition of anti-dumping duties on truck tires and the US's investigation into Southeast Asian production bases have significantly increased pressure on Chinese tire exports.

These export bottlenecks not only limit tire companies' market expansion but also cause a large amount of products originally intended for export to flow back into the domestic market, further intensifying competition there.

In terms of industry competition, the global tire industry is highly competitive. International tire giants such as Michelin, Bridgestone, and Goodyear dominate the industry with their strong brand reputations, technological R&D capabilities, and global market share.

While domestic tire companies such as Zhongce, Sailun, and Linglong have experienced rapid growth in recent years, gradually building competitive advantages in cost control, sophisticated management, and intelligent manufacturing, they still lag behind these international giants in terms of brand influence and market share in high-end products. In the current market environment, if tire companies want to stand out from the competition, they must strengthen technological innovation, improve product quality and performance, and build competitive brands.