Recently, a reporter learned from the tire market that nearly every brand has launched a wide range of new products. This abundance of choices makes the decision-making process more challenging for consumers. 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 intensified. At that time, two-thirds of Michelin’s revenue came from original equipment (OE) tires, while only one-third came from retail sales. Goodyear also set up Dalian Goodyear Tire Co. in China to design and supply original tires for vehicles. It's clear that these companies placed significant emphasis on the OE market during this period.
However, by 2005, the domestic auto industry faced its first major downturn. Profit margins began to shrink, and major manufacturers started to cut costs. As a result, the profitability of the OEM tire business declined. This prompted tire companies to shift their focus toward the replacement tire market, which targets the general consumer base.
Michelin opened its first store in China in January 2003, and by 2007, it had reached 400 stores. Bridgestone, through its Wings brand, entered China in August 2003, opening 50 new locations each year. By 2010, they aimed to reach 500 stores. The rapid expansion of tire brands across China was truly impressive.
Replacement Tires Become the Main Profit Driver
Before and after 2003, major tire manufacturers expanded their domestic production capacity through new factories, acquisitions, and partnerships. However, maintaining a balance between revenue, profit, and cost became a key challenge for these companies. With limited production capacity, increasing profits became a central 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 sector. This is because the replacement market directly targets consumers, and there are multiple middlemen involved. Additionally, vehicle manufacturers often do not prioritize lowering tire prices due to cost control considerations, allowing replacement tire companies to invest more in research and development.
Group "Wolf" Rivals and Strategic Moves
Faced with significantly higher profits in the replacement tire market, Bridgestone, Michelin, and Goodyear began planning and expanding their retail networks several years ago. One would expect them to enter a more stable phase of growth. However, other global players like Dunlop, Kumho, and Hankook have also entered the market, intensifying the competition. Each brand is employing unique strategies to capture market share and gain an edge.
Currently, the Chinese tire market—especially the replacement segment—is still less mature compared to markets in Europe and North America. In this environment, tire manufacturers must adopt a comprehensive strategy that combines macro-level insights with micro-level caution and aggressive market positioning. Only then can they navigate the competitive landscape effectively and avoid being left behind in the race for profit.
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