Following chips, the tire industry has become another hot topic in the field of auto parts.
Bridgestone’s sales in 2020 dropped by 14.6% year-on-year, Michelin’s sales dropped by 15.2% year-on-year, and Goodyear’s sales dropped by 16.44% year-on-year… Recently, multinational tire giants have successively announced their 2020 financial reports, and most of them have experienced varying degrees of year-on-year sales declines and profit losses.
“The main reason for this is the impact of the epidemic. Not only are tire suppliers experiencing intermittent shutdowns and production reductions, but also the production capacity of car companies has been damaged, which has also greatly reduced the demand for tires. Coupled with transportation restrictions caused by the epidemic and other reasons, it is reasonable for its sales to decline and operating profit losses. Even the tire price increase since last year has not reversed this situation.” A researcher said.
The content shown in the 2020 financial report is a true reflection of the operating conditions of many tire giants.
Among the sales of many tire giants in 2020, Bridgestone and Michelin lead the way. Bridgestone is the highest, with 182.573 billion yuan; Michelin is second, with 160.11 billion yuan.
In addition, Goodyear is 79.14 billion yuan, Sumitomo Rubber is 48.7 billion yuan, Hankook Tire is 37.368 billion yuan, Yokohama is 34.936 billion yuan, Toyo is 21 billion yuan, Kumho Tire is 12.69 billion yuan, Apollo is 10.678 billion yuan, and Nokia is 10.26 billion yuan.
The sales of these giants fell between 4% and 16% year-on-year, with an average decline of 10%.
In the financial reports of various companies, although they admitted that growth was weak in the first three quarters of last year, they all gave affirmation to the fourth quarter of last year.
Michelin’s financial report revealed that Michelin’s tire manufacturing volume decreased by 14% in 2020.
In terms of passenger car and light truck tires, its supporting demand contracted by 33% in the first half of 2020, but improved significantly in the second half of the year, and grew by 2% in the last quarter. Replacement demand in the fourth quarter of 2020 was already close to the level of the fourth quarter of 2019.
Bridgestone stated in its financial report that in the fourth quarter of last year, the recurrence of the new crown epidemic led to a decline in demand for passenger car tires. However, as the overall recovery trend continued, the global market demand for truck and bus tires remained strong, which also led to a rebound in fourth-quarter performance.
For the American tire giant Goodyear, not only did it experience a large decline last year, but it has also been in a state of loss for many consecutive years.
Its financial report disclosed that the huge losses in 2020 were caused by multiple factors. For example, Goodyear transformed and upgraded several huge projects in 2020, including the modernization of two tire plants in Germany and the adjustment of the Gadsden, Alabama, plant in the United States.
In operating profits, the leaders are also Bridgestone and Michelin.
Although Bridgestone’s sales are higher than Michelin’s, in the operating profit rankings, Michelin’s 14.7 billion yuan is slightly higher than Bridgestone’s 13.592 billion yuan, a year-on-year decrease of 37% and 35% respectively.
In addition, Hankook Tire is 3.636 billion yuan, Sumitomo Rubber is 2.4 billion yuan, Yokohama is 2.229 billion yuan, Toyo is 2.2 billion yuan, Kumho Tire is 2.13 billion yuan, Apollo is 1.82 billion yuan, and Nokia is 1.48 billion yuan.
In the sales and operating profit rankings, the gap between Michelin and Bridgestone is not large, but in the comparison of net profit, Bridgestone had a net loss of 1.421 billion yuan in 2020. Compared with Michelin’s profit of 4.893 billion yuan, there is a huge gap, but Bridgestone did not explain this in the financial report.
“In fact, most of these companies achieved a ‘V’-shaped reversal in the fourth quarter after last year’s performance plunge, which means that the global tire industry is gradually getting rid of the impact of the epidemic and returning to the normal development track.” Some analysts said that they are optimistic about the development of the global tire industry this year.
“The increase in tire prices basically started in the second quarter of last year and was still rising until early March this year.” Tire prices have been “rising and rising” in the past year.
Indeed, the tire price increase was one of the most popular news last year.
Most tire brands such as Michelin, Goodyear, and Bridgestone have seen price increases, and some brands have seen multiple rounds of increases.
Especially from the end of last year to the beginning of this year, the “price increase” of brand tires intensified.
“The continued rise in tire prices is partly related to the resumption of work and production by car companies after the peak of the global epidemic last year, and on the other hand, it is also related to the increase in prices of upstream raw materials.” Relevant experts said that taking commercial tires as an example, the raw materials used in tires generally account for 44% of natural rubber, 24% of synthetic rubber, 23% of carbon black, and 9% of various additives.
From the second quarter of 2020 to January 2021, the prices of these raw materials have increased across the board. Judging from the international market prices during the same period, the price of natural rubber has increased by 44%, the price of synthetic rubber has increased by 45%, the price of steel wire and nylon cord has increased by 29% and 37% respectively, zinc oxide has increased by 35%, and the price of carbon black has soared by 78%.
The futures price of natural rubber in the international market was around 12,500 yuan per ton in September 2020.
As of February 23, 2021, the futures price of natural rubber stood at 16,390 yuan per ton, and the closing price that day was 16,020 yuan.
At the same time, Southeast Asia, the main rubber producing area, has been affected by the epidemic, typhoons, and heavy rains. The output of the main natural rubber producing areas has declined, which has also affected tire prices.
A report released by the Association of Natural Rubber Producing Countries (ANRPC) shows that due to climate change, extreme weather and rubber leaf disease, global natural rubber production in 2020 was 12.597 million tons, a year-on-year decrease of 9%.
There are currently different opinions in the industry regarding the trend of tire prices.
Some analysts said that as global automobile production and sales are expected to recover well this year, demand for tires has increased and will rise in the future due to low production.
Some analysts believe that with the arrival of the natural rubber harvest season after the second quarter, natural rubber prices may fall, causing tire prices to fall.
Even under the impact of the epidemic and rising raw material prices in 2020, the investment enthusiasm of international tire giants has not diminished at all.
Recently, Goodyear announced that it intends to acquire Cooper Tire for US$2.8 billion (approximately RMB 18.3 billion) to strengthen its position as the leading tire manufacturer in North America.
After the merger of the two companies, Goodyear will obtain approximately 84% of the new company’s shares.
After the acquisition is completed, Goodyear will become the fifth largest tire manufacturer in the world.
In addition to acquisitions, tire suppliers are also forming a new “wave” in investment and expansion.
Michelin revealed in its financial report that it will invest tens of millions of euros to expand its tire production lines.
At the same time, a large amount of money will be invested in new tire materials and tire recycling business.
Michelin expects its business to return to pre-pandemic levels by the second half of 2022.
Continental Group (Continental Tire) is focusing on the high-tech field and has increased its investment by approximately 250 million euros (approximately RMB 1.9 billion) in smart projects including tire monitoring.
In order to increase the profitability of industrial tires and high-end passenger tires, Yokohama Rubber is actively expanding production capacity and maintaining multi-brand operations. It will successively increase the production capacity of factories in India and Thailand, and prepare to build a new off-road vehicle tire factory.
“Choosing to continue to increase investment even though last year’s performance was not good is in itself a sign of confidence in the global tire market.” Some analysts believe that whether it is based on maintaining its dominant position in market competition or improving profitability through mergers and acquisitions or expanding production capacity, this kind of investment can not only strengthen its own competitiveness, but also further intensify competition in the tire market.
“In general, with the increase in global automobile production and sales, the demand for tires continues to increase. From this point of view, the development prospects of the tire industry are promising.” Some researchers said that, especially the new trends in the foreign tire industry such as intelligence, new recycling technologies, and new material utilization, deserve the attention of domestic tire companies.
“This is one of the keys to improving competitiveness in the future tire market.” He believes.
