In 2023, the demand for Chinese tires in the overseas tire market soared, and Chinese tire companies turned losses into profits through exports; and stimulated by the surge in sales of OEMs, the supporting businesses of many tire companies in China are also booming. It can be said that 2023 is the best year for tire companies in the past five years.
However, for the tire retail business, 2023 seems to have become a year that is "difficult to describe". The unstoppable price increases and unsaleable inventory have put pressure on the tire replacement market for a whole year. Will the contrast between the "hot" tire companies and the "cold" tire market continue in 2024? What changes will the tire industry usher in in 2024?
Tire prices continue to soar
The price increase in 2023 began at the end of 2022. According to the forecast in December 2022, at least 24 tire companies will collectively increase prices on January 1, 2023. Since then, the price of tires has skyrocketed for nearly three months, and more than 40 companies have issued a total of 53 price increase notices. Although the price increase of tires has subsided for a while due to the halving of market sales in April, as September approached, with the sudden surge in raw material prices, a more severe price increase wave hit the tire market again-more than 80 price increase notices hit the tire market within 3 months!
Will the price increase in 2024 be so severe?
Of course! It may be even more severe!
Very similar to 2023, some tire companies have issued price increase notices at the end of 2023. German Continental announced in the Japanese tire market that it will increase the price of its commercial tire products by an average of 5% from March 2024. The prices of its summer and all-weather tires will also be adjusted on March 1, and the prices of winter tires will be adjusted on July 1. The reason for announcing the full-year price increase strategy since the end of 2023 is the prediction of soaring raw material and energy prices.
First of all, the first quarter is the harvesting period for major rubber plantations in Southeast Asia. Under the shortage of supply, the price of natural rubber will generally rise sharply from January to April. As for energy costs, some institutions have predicted that after the "six consecutive declines" in oil prices at the end of 2023, diesel and gasoline prices will "stop falling and rebound" in 2024. This also means that tire companies will be under great pressure in manufacturing and transportation costs from January to March.
In order to relieve the pressure, tire companies will most likely start to issue price increase notices to the market after the "oil price" adjustment on January 3. It is expected that in the first round of price increases, the tire market will usher in at least 30 price increase notices.
The export business is difficult to continue
However, even if the price increase notice is issued, tire companies will still "make little profit" in the domestic market, because the domestic market has long been fixed in the "price war" routine in decades of development. A price increase of 1% or 3% will do little to expand the profits of tire companies. The profit structure of most tire companies comes from the overseas tire market. This is why many tire companies can turn losses into profits in 2023 and realize a multiple increase in profits - the overseas market is selling so well!
Will it be the same in 2024? Judging from the current actual situation of the tire market in various countries, the "export" in 2023 may be the best year in the next ten years - in 2024, the tire export business is becoming "tense" due to some unexpected events.
The first thing that restricts tire exports in 2024 is the re-opening of the "double anti-dumping" in the European and American markets. At the end of 2023, the United States launched a double anti-dumping investigation on Thai medium-duty tires. The investigation results, double anti-dumping measures and other related information will be disclosed in the middle of this year. According to previous rules, it is highly likely that medium-duty tires produced by Thai factories will be judged to be subject to "double anti-dumping". Judging from the information that can be collected at present, medium-duty tires produced by Thai factories may face a double anti-dumping tax rate of up to 40% - the export profits of Chinese tire companies may soon drop below 10%.
If export profits are flattened, it may be even more difficult for tire companies to reproduce the profit scenery in 2023.
