Beneath the surface of calm in China’s tire industry, undercurrents are surging to a critical point. An industry reshuffle triggered by severe overcapacity may fully erupt in 2026. “Losing money on every tire sold” has become a reality for many companies, with industry profit margins squeezed to the limit and homogeneous, low-price competition driving infighting to a fever pitch. Meanwhile, new production capacity continues to be added in 2025, with numerous projects nearing completion and operation, further exacerbating the already imbalanced supply and demand relationship.
China’s tire industry has experienced rapid expansion over the past two decades, especially driven by the explosive growth of the new energy vehicle market, which has attracted a large influx of capital into the tire manufacturing sector.
However, with the global economic slowdown and the domestic auto market entering a phase of competition for existing market share, tire demand growth has slowed significantly. The previously rampant expansion of production capacity has now become a “Sword of Damocles” hanging over the entire industry. “The core of the current industry predicament is structural overcapacity,” a tire company executive frankly stated. “There is a severe overcapacity in low-end tires, but the capacity for high-performance, green, and intelligent tires remains insufficient. Many companies are still stuck in the low-price competition stage, lacking the ability and determination to transform and upgrade.” This overcapacity has directly led to fierce price wars. Since the beginning of this year, prices for many tire categories have continued to decline, with some product prices approaching or even falling below the cost line. High fluctuations in raw material costs have further squeezed companies’ profit margins. The industry’s predicament is evident in the third-quarter reports of listed companies: many tire companies saw a significant year-on-year decline in net profit, with some incurring losses. The survival of small and medium-sized tire companies is even more difficult, with many already operating at half capacity. “Now it’s not about who earns the most, but who loses the least and survives the longest,” said a Shandong tire company executive. “The industry has entered the pre-elimination phase, and a number of companies will be eliminated in 2026.” This involution is not only reflected in pricing but also extends to channel competition, marketing investment, and other aspects. Many companies, in order to maintain market share, have to bear enormous cash flow pressure, creating a vicious cycle of “the more they produce, the more they lose; the more they lose, the more they have to produce.” Similar to the electrification transformation of the automotive industry, the tire industry is also facing profound changes in its technological roadmap. New energy vehicles have placed new demands on tires, such as low rolling resistance, high load-bearing capacity, and quietness; increasingly stringent environmental regulations are driving the development of green tires; and under the trend of intelligentization, the value of tires as a data entry point is becoming increasingly prominent. However, this transformation requires huge investments. The shift from traditional tires to high-end products such as new energy-specific tires, self-healing tires, and smart tires involves comprehensive changes in materials research and development, process improvement, and equipment upgrades, placing extremely high demands on companies’ financial strength and technological accumulation. “The industry is undergoing a differentiation,” noted a tire company executive. “Leading companies, leveraging their scale advantages and technological accumulation, are accelerating their transformation towards high-end, green, and global markets; while a large number of small and medium-sized enterprises are trapped in the quagmire of low-end production capacity, a predicament that even technological upgrades and equipment replacements cannot change.” This differentiation is particularly evident in the capital market. Since 2025, many listed tire companies have raised funds through private placements and convertible bonds for technological upgrades, capacity expansion, and overseas expansion. Small and medium-sized enterprises lacking capital market support face even greater financial pressure. Many industry experts predict that 2026 will be the true “year of reshuffling” for the tire industry. With the continued release of excess capacity and further intensification of market competition, industry concentration will rapidly increase. “The tire industry will see three major trends in 2026,” an industry analyst pointed out. “First, mergers and acquisitions will accelerate, with leading companies expanding their scale advantages through acquisitions and consolidation. Second, outdated production capacity will be eliminated, with some technologically backward and cash-strapped companies exiting the market. Third, globalization will deepen, with strong companies increasing overseas investment to circumvent trade barriers and seek new growth points.” For tire companies, the survival strategy is clear: either move towards the high-end market through technological innovation and product upgrades, maintain their niche market through refined management and cost control, or integrate industry resources through capital operations. Those companies lacking core competitiveness and differentiation are likely to be eliminated in this round of competition. 2026 will be an era of “survival of the fittest” for the tire industry. There are no bystanders in this competition; every participant must face the triple pressures of overcapacity, meager profits, and the urgency of transformation. Similar to the “financing war” in the new energy vehicle industry, tire companies are also stockpiling resources for the winter through various means. The difference is that competition in the tire industry is more traditional, and the shakeout will be more brutal and direct—there aren’t many stories to tell, only real battles fought over cost, technology, quality, and distribution channels.
