New data from Astutus Research* quantifies tire manufacturers’ loss in revenues from vehicle producers, with North America the hardest hit

Potential demand for new cars has made a surprisingly strong recovery following the precipitous declines in 2020. Government policies have supported incomes in many markets and the predicted large scale increases in unemployment have not materialised. Furthermore, as some commuters have attempted to avoid public transport because of safety concerns, car-usage has recovered far faster than demand for public transport.

New car sales have in fact been limited by supply rather than demand. A shortage of components, particularly semi-conductors, has reverberated through the automotive sector. Vehicle manufacturers have had to reduce shifts and idle plants resulting in a significant loss in vehicle production. The impact was felt particularly sharply in the third quarter of 2021, but it is expected to continue well into 2022. A rebound in vehicle production and sales is expected from 2023 to 2025, based on the release of pent-up demand, positively affecting the OE tire segment.

This year, however, the result has been lower than expected original equipment passenger car and light truck (PCLT) tire sales. According to new data from Astutus Research this will represent a loss in revenues of over US$2 billion for the global tire manufacturers. North America accounts for the largest share of this lost value – reflecting both the significant disruption to vehicle production, and the high average price of tires compared to other world regions. This is a result of the mix effect, with a far greater share of high rim diameter tires. Europe accounts for almost 30% of the lost value globally, with a further 27% in the Asia Pacific region. The low share of lost revenues in South America and the Middle East Africa region is a result of the lower volumes of vehicle assembled in these regions, combined with lower tire average selling prices.

A recovery in light vehicle production from 2022 (and particularly 2023 and beyond), when combined with a positive mix effect, should give a substantial boost to OE tire revenues over the next few years.

‍

In a declining market severely impacted by the coronavirus pandemic, tires from China and Russia gain share amongst European Union PCLT imports

Data from Eurostat and HMRC compiled by Astutus Research shows that passenger car and light truck (PCLT) tire imports into Europe* declined by 20% in the first eight months of 2020, a reduction of over 20 million units.

For the first time, China accounted for more than half of all PCLT tires entering the region.

In relative terms, Russia was the best performing of the major import sources, with volumes declining by just 2%. The weakness of the Russian ruble aided its cost competitiveness.

Korean imports fell by 35%, in part resulting from Nexen’s substitution of imports with local production as it ramps up supply from its plant in the Czech Republic.

Tire trade will be further disrupted by the second wave of Covid-19 infections currently impacting numerous Europe countries. Additionally, the United States government is currently considering duties on PCLT tire imports from certain countries which, if enacted, could have a secondary impact on European sourcing in 2021.

In the first eight months of 2019, the then 28 nations of the European Union imported 105 million passenger car and light truck (PCLT) tires from outside the region. With the coronavirus pandemic having a major impact on tire demand and, to varying degrees disrupting production, the EU-27 and the United Kingdom together imported 21 million fewer tires in the corresponding period of 2020, a reduction of 20%.

Each month of 2020 has seen a year-on-year decline in PCLT tire imports, with a near 50% reduction in May and a fall of 45% in June. Declines in July and August were sequentially smaller, and by the final month for which official statistics are available, the reduction was just 12%.

Whilst there has been a reduction in the volume of PCLT tire imports to Europe from each of the leading source countries, there are significant differences in relative performance. The share of PCLT tires from China increased despite unit volumes falling by 15.6%. For the first time, China accounted for more than half of total PCLT tire volumes imported into the region.

Russia significantly outperformed, with imports to Europe declining by just 2%. The country became the fourth largest source, surpassing Serbia. Several manufacturers now export tires from their plants in Russia, led by Nokian and Pirelli and aided by the relative weakness of the Russian ruble.

By contrast imports from South Korea and the ASEAN region have declined significantly more sharply than the market. Korea has seen a 35% reduction in PCLT tire units in the first eight months of 2020, falling to third place behind Turkey. Imports from Korea were impacted by the ramp-up of production at Nexen’s new plant in the Czech Republic which has allowed it to substitute some imports with locally sourced tires. Imports from the ASEAN countries declined by 31% compared with 2019 although, within this total, volumes from Thailand and Vietnam fell more sharply whilst the Philippines, Indonesia, and Malaysia performed better.

Numerous European nations have imposed restrictions on their citizen’s activity and movement as part of their efforts to combat a second wave of Covid-19; this is now expected to delay the recovery of tire demand in the fourth quarter. The global trade in PCLT tires could be further disrupted in 2021 if the United States Department of Commerce decides to impose duties on subject tires from Thailand, South Korea, Vietnam, and Taiwan. The US imported 85 million PCLT tires from these countries in 2019; manufacturers and importers would likely adjust their sourcing patterns in such an eventuality, with a secondary impact on the European market.

*Data for 2019 refers to the 28 nations of the European Union. For 2020 we maintain the same scope, that is EU-27 plus the United Kingdom.

‍