ERJ Trends 2024: Tire industry investment moving in new directions

Amid record investment levels, global tire production has steadily shifted to lower-cost regions over the recent years – a structural industry trend that has gathered considerable momentum in 2024.

And while Europe has attracted some investment – projects by Bridgestone in Spain and Hankook in Hungary – the bulk of the capex spending announced this year has gone to projects elsewhere.

Of even greater concern for the European tire industry is the increasingly heavy toll being taken by low-cost imports from Asian countries on the viability of long-established manufacturing facilities and jobs in the region.

Michelin, for example, recently announced plans to axe two facilities in France, adding to five othe major plant closures in the pipeline in Germany – three by the French group and two by Goodyear. 

While other factors, such as high energy costs in Europe, are at play, the dominant driver behind the loss of these facilities is competition from lower-production-cost regions.

Announcing its latest closures, Michelin cited a ‘profound transformation’ of passenger-car and truck tire markets which have moved “strongly toward low-cost tires mainly from Asia,” over the recent years.

In the space of 10 years, it said, the market-share of entry-level passenger car & van and truck tires increased by 9 and 11 points respectively, to the detriment of premium product sales.

“This situation has led to structural production overcapacity in some Michelin passenger car-van and truck tire plants in Europe,” continued the French group’s statement.

The restructuring trend is not limited to Europe, as evidenced by Sumitomo Rubber Industries’ (SRI) decision to close its US tire production operation and Yokohama Rubber Co.’s (YRC) closure of its off-road tire plant in Israel.

For its part, SRI linked the shut-down of its New York site to a deterioration in the productivity and profitability of the unit, which makes tires for cars, motorbikes, trucks and buses – amid “severe” trading conditions.

Explaining its move, YRC said major tire manufacturers have set up facilities in south Asia in recent years to be closer to the key raw materials and low-cost labour: “This has caused conversion costs in Israel to become uncompetitive compared to the Asian producers,” added the Japanese group.

Nevertheless, tire makers budgeted well over $13 billion in the past year toward new factories and capacity expansions. It’s the largest 12-month collective investment sum tracked by this report over the past four decades.

The projects represent annual production capacity of over 100 million passenger and 5 million truck/bus tires, along with tens of thousands of tonnes of off-highway tires, coming on stream over the next three to four years.

Below are some of the investments announced by tire makers over the past 12 months:

China’s Zhongce Rubber Group and Sailun Group lead the pack in terms of investment size, with more than $1.2 billion and $800 million, respectively in budgeted spending on multiple expansion projects.

That was slightly ahead of Yokohama Rubber’s $745 million in capex spending, including $389 million earmarked for a new passenger/light truck tire plant in Saltillo, Mexico, rated at 5 million units per year.

Bridgestone Corp. has also disclosed $467 million in specific expansion and modernisation initiatives, including a $224 million, six-year project at its  production plant in Burgos, Spain.

The investment is designed to increase capacity for larger car tires (those of 18-inch rim diameter and larger) by 75% to over 7 million units a year by 2030.

The Japanese group also plans to invest $166 million at its Kitakyushu, Japan, earthmoving tire plant over the next three years, while budgeting $77 million over three years at multiple locations in China.

Ceat Tyres is also investing $90 million toward capacity expansions to boost truck/bus tire capacity at its Chennai, India, by 1,500 units a day. 

As expansions in Asia continue, Germany's Continental is also adding capacity for passenger tires at its factory in Rayong, Thailand, in response to “growing demand for premium tires” in the region and elsewhere. The €365 million investment will increase capacity at the plant by 3 million units per year, bringing total annual capacity to 7.8 million units.

The group also is upgrading and expanding its speciality tires factory in Sri Lanka with a $14 million, three-year investment project.

Meanwhile, Goodyear is committing $575 million to upgrade and expand its passenger tire plant in Napanee, Ontario, to provide additional capacity for OE and replacement all-terrain tires.

China's Guizhou Tyre is investing $227 million to build an “intelligent” passenger tire plant in Vietnam, with a nameplate capacity of 6 million car tires per year, in addition to the existing 1.2 million units of truck/bus capacity at the same location.

Hankook Tire & Technology revived plans to add capacity for truck and bus tires at its factory in Racalmas, Hungary, with a $590-million, three-year investment project. Hankook plans to add capacity totaling 800,000 TBR units a year at the factory.

China's Jiangsu General Science Technology (JGST) has budgeted nearly $500 million for two expansion projects in Thailand and Cambodia.

JK Tyre has earmarked nearly $168 million toward capacity expansions over the next two years, including $120 million to expand capacity for passenger tires by over 30% and $48 million toward ramping up the output of off-road and radial truck/bus.

In Setif, Algeria, Iris Tyres plans to double passenger tire capacity to 4 million units per year, while also adding capacity for the production of 800,000 truck/ bus tires.

Michelin has budgeted $85 million for a modernisation and expansion project at its Troyes, France, farm tire factory, including the installation of a new generation of tire-building equipment for agricultural tires.

Michelin also plans to realign its manufacturing base for truck tires and related semi-finished products, including the conversion of plants in Olsztyn, Poland, and Shenyang, China, to passenger tire production.

Nova Motorsports is investing $22 million at the recently acquired CNB/Camac tire factory in Palmeira, Portugal, to upgrade the plant, which has a production capacity of over 500,000 tires annually.

Pirelli has agreed to be part of a joint-venture with Saudi Arabia’s Public Investment Fund (PIF) to build a tire plant in the Persian Gulf state in a project valued at $550 million and with a projected annual capacity of 3.5 million tires, starting in 2026.

Full article available in recently published ERJ Nov/Dec issue