Global Tire Industry
In a remarkable trajectory, the global tire market has been accelerating up to a trillion-dollar industry. Over the past decade, tire consumption has increased from 1.483 billion units in 2011 to a staggering 1.749 billion units in 2022.
Remarkably, the Asia-Pacific region emerges as the tire production powerhouse, with China at the driver’s seat. A staggering 60% of Chinese tires hit the international tarmac, solidifying China’s role as a tire production titan. In a rubber-burning performance, China’s 2022 tire exports sprinted to 552 million units, further underlining its dominance in the global market.
China’s influence doesn’t just stop at exports – it’s a major tire-producing heavyweight, beat out over a third of the world’s output. In 2022 alone, China’s tire production clocked in at a remarkable 856 million units, maintaining a steady growth rate that’s gripping the track.
Market dynamics have shifted slope the scales towards East Asian contenders. However, the road for some industry stalwarts like Michelin and Bridgestone has been marked by a decline in market share year after year. The industry’s CR3, representing the top three players, move from 56% in 2002 to 37% in 2017. Similarly, the CR6, encompassing the leading six companies, went from 70% in 2002 to 51%, wave a changing landscape.
As the tire industry continues to navigate twists and turns, the Asia-Pacific region’s roaring engine and the evolving market dynamics for key players promise an exhilarating ride ahead.
China’s tire labor cost advantage is significant
A comparative analysis of cost structures between domestic and foreign tire companies reveals notable disparities. Domestic companies exhibit a consistent distribution of cost categories, with raw materials comprising a substantial portion, approximately 80%. In contrast, prominent foreign enterprises like Michelin and Goodyear allocate only 20%-40% to raw materials due to their global network of material processing plants, affording partial self-sufficiency. Chinese tire firms exhibit a distinct cost advantage in labor, constituting less than 10%. Conversely, international tire leaders allocate around 30% of costs to labor, with employee salaries comprising over 70% of labor expenses. Employee remuneration at industry pinnacles, exemplified by Michelin, surpasses that of domestic counterparts significantly. This wage disparity is exemplified by Sailun Tire’s average annual salary of roughly 120,000 yuan, Linglong Tire’s 96,800 yuan, and Michelin’s notably higher figure of 376,800 yuan. Additionally, Chinese tire manufacturers boast markedly larger single-factory production capacities, exceeding those of global tire giants by more than twofold. This augmented output potential derives from robust production efficiency and a pronounced scale effect within individual manufacturing facilities.
Domestic tire short-term pressure improved
In 2022, the tire industry confronted substantial price hikes in critical raw materials like natural rubber, butadiene rubber, and carbon black. Contemporary, the Russia-Ukraine conflict propelled crude oil prices upward, imposing significant cost burdens on both domestic and foreign tire manufacturers and reduce overall profitability. The situation has shown gradual signs of improvement. Starting in 2023, the costs of essential inputs such as natural rubber and styrene-butadiene rubber have receded, with a marked decline in carbon black prices. This has moderately relieved cost pressures on enterprises. Concurrently, sea freight rates have decreased notably, with container freight indices for Baltic Sea routes and China/East Asia to North American east and west coasts plummeting by 78.15% from their peak levels. These developments have effectively support the export profitability of Chinese tire companies.
