A “more even” global LV tire market in 2017

Based on article published in July/Aug issue of European Rubber Journal

The global tire market is developing against a background in which world economic growth is still recovering from the financial crash of almost a decade ago and where emerging markets are no longer such big drivers of growth.

Within this analysis from Robert Simmons, head of rubber and tire research at UK consultancy LMC International, is a gradual decline in Chinese GDP growth from over 10% to around 6% per annum between 2010-19.

Simmons also pointed to the onset of weakness in North American and western European vehicle markets in 2016. This, he said, looks set to continue this year, but will be offset by a pick-up in other market regions including China, which saw 12% growth in vehicle sales in 2016.

Then, looking to the market for light vehicles (LV) in various world regions in 2017, Simmons forecast an increase of 530,000 LV sales in China compared to 980,000 in Asia Pacific overall, 324,000 in western Europe and just 65,000 in North America.

And, according to the analyst, LV tire sales are expected to increase by 3% globally this year, with India overtaking the Middle East and China as the fastest growing market at an over 8% year-on-year rate.

Putting an end to its tax incentives, China’s LV tire sales growth is pegged at just below 8% this year, compared with the highest rate of more than 10% in 2016.

The South America and East Asia markets, both saw decreases last year but will likely have 3% and 2% growth respectively this year.

Overall, Simmons said that growth in the tire market would be dominated by the emerging markets, due to rising vehicles sales and an increasing ‘parc’ – the latter factor helping to drive up sales of replacement tires.  Tire imports are, meanwhile, continuing to put pressure on production in developed markets, Simmons continued.

The US, for example, has lost 100 million units per year capacity, mostly in the replacement market, over the past 15 years, he said. On the other hand, 30 million units per year new capacity is expected by 2020, mainly operated by overseas tire makers.

But US duties on China imports have done “absolutely nothing” for its total imports, averred Simmons. “Chinese imports have gone away from the US market but they’ve been replaced by imports from other low-cost centres.”

According to some other market watchers, such duties have contributed to Chinese manufacturers moving capacity elsewhere. There is 30 million unit per year overseas capacity, principally in ASEAN countries and the US, run by Chinese tire makers. This number, they say, is forecast to reach 60 million by the end of 2017.

Article based mainly on a presentation by Robert Simmons to the 2017 China Rubber Conference held in Guangzhou, China.