The tire industry has set off a new round of price increases.
According to incomplete statistics, since March, more than 80 tire companies have issued price increase letters, with the increase generally ranging from 2% to 5%.
Among them, Tengsen Rubber’s entire line of products increased by 10%, setting the largest price adjustment in this round.
The core driving force for this round of tire price increases comes from the violent fluctuations in the upstream raw materials.
Zhuochuang Information monitoring data shows that since March, driven by the continued rise in prices of core raw materials such as synthetic rubber and carbon black, domestic tire production costs have continued to rise.
Synthetic rubber has experienced the most significant growth due to its high degree of binding to international crude oil. Among them, the average monthly price increase of styrene-butadiene rubber and butadiene rubber in March was around 12% month-on-month, and the year-on-year increase was around 22%, becoming an important driving force for the increase in tire costs.
As an important filler, the price of carbon black rose by more than 13% month-on-month in March due to rising coal tar prices and environmental protection policies.
Guo Juan, an analyst at Zhuochuang Information, said that under the dual effects of rigid pressure on the cost side and the game of market supply and demand, tire companies have a strong willingness to increase prices. Many companies have successively issued price increase letters, and industry price increase expectations continue to heat up.
A research report recently released by Kaiyuan Securities stated that this round of tire price increases has three major characteristics: first, wide coverage, with participation from foreign giants to local leading companies; second, complete categories, including passenger tires, all-steel truck tires, light truck tires, and inner tube pads; third, price adjustments are intensive, with April to early May being the centralized execution period.
Huo Hongyi, founder of Numantra Business Strategy Consulting, believes that this round of price increases is both cost-driven and includes profit restoration considerations.
Since the second half of 2024, the continued rise in raw material prices has severely squeezed industry profits. Tire companies really need to increase prices to alleviate cost pressures.
At the same time, Huo Hongyi also pointed out that the cost pressure in the tire industry has spread from raw materials to other areas, such as logistics. The uncertainty of international shipping prices and the rise in domestic transportation costs have a significant impact on companies with a high proportion of exports. The upgrade of environmental protection requirements has also prompted companies to continue to increase investment, such as the update of exhaust gas treatment equipment and waste recycling equipment.
However, it is worth noting that companies frequently issue price increase letters, but terminal retail prices do not rise simultaneously.
Guo Juan said that the current round of price increases in the tire market showed obvious characteristics of “positive announcements of increases but lagging implementation.” The terminal market prices did not increase simultaneously with the company’s price increase letters. Instead, there were periodic loosenings in some channels. The core reason was the dual pressure caused by the lag in the price increase transmission cycle and the promotional policy of the spring order fair.
A dealer engaged in the sales of domestic brand tires said that at present, price increases at the upstream factory end in April and May are a foregone conclusion, and dealers’ cost of purchasing goods is rising.
“We have to digest the early stockpiling while dealing with new price purchases. We dare not blindly stockpile goods, but we are also worried that continued price increases will cause costs to get out of control.”
“In the next 1 to 2 months, as the low-priced inventory in the channels is gradually digested, the spring order fair promotion policy ends, and the superimposed price increase letters are implemented, the actual transaction price in the tire market may increase in different channels.” Guo Juan said, but due to the overall weak terminal demand, the actual transmission process of price increases may be slow and incomplete.
Yuan Shuai, deputy secretary-general of the Zhongguancun Internet of Things Industry Alliance, said: “This round of price increases is not only an opportunity for the tire industry to get out of the profit trough, but also the beginning of a new round of reshuffle. Only companies that can balance cost transmission, market share and long-term development can take advantage of subsequent competition.”
