Michelin expects volume decline in 2025 as forex, inflation weigh on first half results

Clermont-Ferrand, France – Michelin expects full-year 2025 volumes to decline by around 2% to 3% year-on-year, despite anticipated growth in the second half of the year.

The outlook reflects pressures in OE markets and currency headwinds, the French tire major said during a 'pre-close' investors call on 25 June.

According to the group “the general [market] context remained cloudy and uncertain,” with demand varying widely across regions and segments.

OE passenger car markets (PC/LT), Michelin said, will remain 'tough' up to the yearend, except China which should stay positive – though potentially challenged by the US tariffs situation.

Meanwhile, replacement businesses in PC/LT and and truck & bus (TBR) reamin “pretty resilient as usual,” continued Michelin's assessment.

However, it noted, the “most recent geopolitical turbulences are accentuating the unpredictability of the [trading scenario].”

OE demand in truck and in off-road is still likely to be “a headwind as expected”, with OE North America rebounding only in 2026.

Mining tires “will be a tailwind,” both on a favoruable comparison basis and driven by the good orientation of the demand, on a globally sound inventory situation.

Non-tire is expected to be positive in the second half, on a more favourable comparison basis.

Material costs, currency impact

In terms of costs, raw material inflation is expected to total €200 million in 2025, the bulk of which was already absorbed in the first half.

Industrial and logistics inflation – mainly labour-related – is also projected to add another €200 million to costs this year.

Selling, general and administrative (SG&A) expenses are forecast to stay flat year-on-year, with “productivity gains and tight steering offsetting inflation.”

Foreign exchange remains a significant drag on performance.

Assuming a Euro/US Dollar exchange rate of 1.14 from April to December, Michelin expects a full-year negative impact of €550 million versus 2024.

The group, however, noted that a US$0.01 cent movement in the rate could typically impact earnings (EBIT) by €30 million.

The group expects the price/mix effect to remain positive over the year, although it is expected to moderate in the second half.

Elsewhere, commenting on first-half results, Michelin said forex impact will have a more negative impact than estimated due to the weaker dollar.

Price and mix continue to support the topline, aided by a favourable channel mix, growth in 18-inch-and-above tire sales, and an improving business mix in mining.

Operating income (SOI) before forex is expected to represent 45% of full-year SOI, in line with previous guidance.

First half performance

For the first half, Michelin highlighted a “volume drop-through” of around 50% year-on-year, and a “strong mix drop-through of 70–75%”.

In addition to raw materials and SG&A costs, Michelin also noted a currency exchange drop-through of 25–30% for the first six months of the year.

Segment performance in the first half was mixed across Michelin’s three business lines

SR1 (PC/LT, two-wheeler) remained the most resilient segment. OE volumes were dragged by weak markets in Europe and North America, as well as market share losses due to “ exposure to certain OEMs.”

China OE, meanwhile, “bounced back” in the second quarter.

Replacement sales for the Michelin brand held steady with “no sign of mileage slowdown,” and sales of 18-inch-plus tires continued to grow.

SR2 (TBR) followed a similar trend to first, with OE sales hit particularly hard.

North American markets declined by double digits, while European OE showed “some uptick” in the second quarter.

Michelin also noted that its pricing strategy, aimed at vaorlising its offers, led to some market share losses.

In replacement, Michelin brand tire sales were stable in a flat market, while retread volumes in North America remained under pressure from low-cost competition. Connected tire offers showed some growth.

SR3 (specialty tires and non-tire) continued to face headwinds in off-road OE segments, particularly in agricultural and construction tires.

However, mining tire sales improved sequentially, and aviation remained on a growth trajectory.

Inventory levels across distribution channels appeared normal.

Michelin said it had not seen any significant inflow of low-cost imports into Europe in the wake of recent US tariff announcements, though it cautioned that “it is too early to say” after only two months.

The French group also noted that restructuring efforts are progressing ahead of schedule, with the closure of the Cholet factory, which produced its final tire “last week, several months earlier than initially planned.” (ERJ report)

This, among other projects, is expected to contribute €150 million to 2025 performance.

Michelin will publish full first half results on 24 July. The current assessment does not include June figures, a month the group described as “big in terms of business.”