Recently, the reporter learned from the tire market that nearly every brand has launched a wide range of new products, creating an overwhelming number of choices and making the selection process more challenging. Why is the tire market experiencing such a surge in new product introductions?
The Era of Original Equipment Is Fading
In 2003, as the automotive industry entered its golden age, competition among tire manufacturers also intensified. At that time, two-thirds of Michelin's revenue came from original equipment (OE) tires, while the remaining third came from retail sales. Goodyear even set up Dalian Goodyear Tire Co. in China to design tires specifically for vehicle manufacturers. This clearly shows how important the OE market was to major tire companies back then.
However, by 2005, the domestic automotive industry faced its first major setback. Profit margins began to shrink, and major automakers started cutting costs. As a result, profits from OEM tires declined. This shift forced tire manufacturers to look toward the replacement tire market, which serves the general consumer, as a new source of income.
Michelin opened its first store in China in January 2003, and by 2007, it had reached 400 stores. Bridgestone’s Wings chain expanded rapidly in China, opening 50 stores per year starting in August 2003, with a goal of reaching 500 by 2010. The aggressive expansion pace of these global tire giants was nothing short of impressive.
The Replacement Market Becomes the Main Profit Driver
Before and after 2003, major tire companies expanded their domestic production through new factories, acquisitions, and partnerships. However, maintaining a balance between revenue, profit, and cost remained crucial for sustainable growth. With limited production capacity, increasing profitability became a key concern for factory managers.
A senior executive from Yokohama Tire, who preferred to remain anonymous, told the reporter that the profit margin in the replacement tire market is typically two to three times higher than in the OEM market. This is because the replacement market directly targets consumers, and there are more intermediaries involved. Additionally, vehicle manufacturers often don’t prioritize lowering tire prices for cost-cutting reasons, allowing replacement tire companies to invest more in research and development.
Group of "Wolves" Fight for Market Share
Faced with significantly higher profits in the replacement market, Bridgestone, Michelin, and Goodyear began expanding their retail networks several years ago. One would expect this to lead to a more stable phase of growth. However, brands like Dunlop, Kumho, and Hankook have added to the competition, each employing different strategies to capture market share.
Currently, the Chinese tire market, especially the replacement segment, is still less mature compared to markets in Europe and the U.S. In this environment, tire manufacturers must adopt a balanced approach—combining macro-level strategy with micro-level caution and aggressive market positioning—to stay ahead. They need to navigate the competitive landscape carefully, ensuring they don’t get left behind in the race for profit.
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