Selling large size tires, be careful!

After the financial data of major foreign-funded tire companies came out, the theory that "large-size" tires are more profitable was once again put before Chinese companies.

Hankook Tire, the sales proportion of tires 18 inches and above increased to 46.5%, profits increased by 32.7%, and the operating profit margin reached 18.7%; Michelin Tire's sales of tires 18 inches and above accounted for 65%, and the operating profit margin of passenger car tires reached 13.1%; Goodyear is increasing the production capacity of large-size tires to consolidate profits.

But if you really copy the foreign practices and increase the sales proportion of large-size tires, the business will be over!

01 Supporting powerful, foreign-funded large-size market can play well
If you look closely at the financial report, you can find that almost without exception, companies that can achieve sales and profit increases through large-size tires are companies that already have brand influence in the high-end tire market.

After Hankook has been deeply involved in the supporting market for many years, it has gradually upgraded its product portfolio through cooperation with OEMs. European, American and Japanese tire companies have made such a development strategy because they have a huge share advantage in high-end models.

It can be said that almost all tire companies that mentioned that large-size, high-value tires have made outstanding contributions to profits are leading tire companies - Michelin, Hankook, Kumho, Linglong, Sailun, Linglong, Senqilin, etc., almost without exception, are heavyweight tire companies.

As mentioned above, these tire companies generally have a large share advantage in the supporting market, especially in the new energy supporting market. The partners who cooperate with these tire companies are often world-renowned car companies, and the supporting models are often concentrated in SUVs and new new energy models.

These models are generally larger and more luxurious, so their tire sizes are also larger, and the supporting sizes of some models are generally between 18 inches and 20 inches.

Taking the Beijing Auto Show as an example, 19-inch and 20-inch tires have become the most common supporting sizes at the auto show, accounting for 49% of the supporting share of the auto show; 18-inch and 21-inch tires both account for about 16% of the total supporting share. Overall, tires of 18 inches (inclusive) and above have accounted for about 98% of the Chinese supporting tire market.

In addition, there is more room for profit in supporting high-end and luxury models, so it is easier for leading tire companies to obtain high profits from large-size matching. However, it should be noted that the current contribution of large-size strategies to profits is mostly reflected in leading companies with matching advantages. For small and medium-sized enterprises, it is not easy to say how much large-size products contribute to profits. In fact, it is a helpless move for many small and medium-sized tire companies to add large-size production lines.

02 Only hearing foreign capital making money, foreign capital suffering

Although large-size tires do bring higher profits to companies, looking at the financial reports, because they are expensive, foreign-funded tire companies also suffered a decline in sales in 2024. The fact that sales fell by more than 5% tells tire companies that large sizes are not a business that everyone can get involved in.

In fact, even if Chinese tire companies have added large-size tire production lines, because consumers are more operating vehicle drivers, prices cannot go up at all. This also means that although many tire companies have added several large-size tire production lines, large sizes have not brought more profit growth to these companies.

In fact, the impact of large-size tire sales on small and medium-sized enterprises is not that great, because in the replacement market, the current mainstream choice still does not involve large sizes too much.

In this year's tire business survey on the market's hot-selling size preferences, it was found that 15-inch, 16-inch and 17-inch tires are the three most popular sizes in the domestic market. The main consumers are owners of operating vehicles and some commuter car owners who have reached the tire replacement cycle.

So in terms of sales, these three sizes are still more advantageous in the domestic market. Although the first wave of new energy tire replacement cycles has gradually arrived since the second half of 2022, overall, there are obviously more people who prefer to replace the original brand.

And car owners who are willing to try the brands of small and medium-sized tire companies are more out of consideration for price. This also means that in the large-size tire market, small and medium-sized enterprises rely on the "low-price strategy" to gradually expand their market share-profits are still not the contribution of large-size tires to them.

03 Are large-size tires the future?
As the penetration rate of new energy vehicles increases, and the sales of new energy models and SUVs increase, it is an indisputable fact that the sales of large-size tires will increase in the future. However, it is still unknown how much share this market can give to small and medium-sized enterprises.

Larger tires with lower aspect ratios often require tire companies to invest more in research and development during research and development and manufacturing, and also require more competition experience and testing experience to achieve product performance upgrades. However, whether it is research and development or the accumulation of experience, it is currently easier for leading companies with strong financial strength to do so.

Therefore, this is why large-size tires of leading companies can often be priced higher and more convincing to OEMs. The large-size tire market has a future, but it seems to be only the future of the sales layout of passenger car tires of leading companies.