Pricing 'to buoy' European tire makers in 2024

London – EU-based tire makers are continuing to benefit from an ability to maintain ‘pricing discipline’ amid inflationary and other market pressures, according to a report issued 7 Dec by HSBC Global Research.

As a result, Michelin, Continental Tires and Pirelli are on track to see “unprecedented” price/mix increases of 27%, 35% and 41% respectively between 2020 and 2023, said the study titled ‘EU tyre makers: defying pricing pressure’.

Pricing strategy among the leading European tire makers has also been bolstered by the need to offset currency headwinds ranging between 3% and 6% this year, added HSBC Global Research.

However, it noted, with the exception of labour costs, inflationary headwinds have eased: raw materials, energy and logistics costs all registering year-on-year declines during the second half of 2023.

Indeed, HSBC Global Research believes that prices in the overall market “have peaked and the current deflationary environment will put downward pressure on tire pricing.”

But, the report added, “we don’t expect tier-1 tire makers to experience significant pricing pressure in 2024” – HSBC noting a continuing need for pricing discipline in the face of potential raw material headwinds during the second half of next year.

Meanwhile, European players are set to leverage their strong positions in the premium tires segment, which has generally outperformed the standard tire market over recent years.

Therefore, amid an industry-wide shift to producing higher-value tires over the mid-to-long term, EU tire makers are expected to "benefit from better mix and higher pricing power given the focus on premium segments.”

On the other hand, , said HSBC Global Research noted that limited, medium-term prospects for volume-growth are likely to restrict the ability of European players to deliver extra profits from price/mix enhancements.

The report identified Pirelli as the front runner in the premium segment, with high-value tires now driving around 75% of its total revenues and over 90% of its operating profit.

Michelin and Continental, it added, “have now reached a relatively higher exposure to premium tires that allows them to be largely protected from pricing pressure in the lower segment.”