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4/26/2017
1
Global tyre market outlookGlobal tyre market outlook
Robert Simmons
LMC Internationalwww.lmc.co.uk [email protected]
Forecasts Services Independent
LMC is the leading economic & business consultancy for the tyre, rubber and automotive industries
About LMC
• Rubber− Natural rubber− Synthetic rubbers
• Tyres− Sales & production− Size segments− LVs & MHCVs− Motorcycles
• Off-the-shelf reports• Bespoke consulting• Event presentations• Webinars
We do not produce, trade or broker.
LMC’s analysis and advice is entyrely objective.
2 Confidential
• Automotive− Sales & Production− Engine/Transmission− LVs, MHCVs & Buses− Market trend analysis
Oxford Detroit New York Frankfurt Kuala Lumpur Bangkok Singapore Shanghai
4/26/2017
2
Future Tyre industry Outlook
Future tyre demand is determined by:• OE tyres
R l t t (th l t t) d d• Replacement tyres (the largest segment) depend upon:
• Vehicle parc (vehicles in use)
• Replacement ratio (how often tyres are replaced)
Both OE and replacement tyre sales are dependent upon on vehicle densities (vehicles per 1,000 population)
Future tyre production
3 Confidential
Future tyre productionTyre trade then determines where tyres are produced.
Import duties are changing global trade and production patterns
GDP per capita determines tyre demand
USA
900
1000
Light vehicle densityRapid growth Mature
MexicoRussia Taiwan
KoreaMalaysia
UKJapan
Spain GermanyFranceItaly Canada
400
500
600
700
800
900
o of
LV
per 1
,000
pop
ulat
ion
4 Confidential
IndiaIndonesia
China
ThailandTurkeyBrazil
Mexico
0
100
200
300
0 10,000 20,000 30,000 40,000 50,000 60,000GDP per Capita
N
4/26/2017
3
Emerging markets were the engine of growth but this has slowed
The world changed after financial crisis of 2008/09
10% 10% 8%5 years of slowing growth
2000-12 2010-18
0%
2%
4%
6%
8%
GDP
grow
th (%
)
0%
2%
4%
6%
8%
GDP growth (%
) 3%
4%
5%
6%
7%
GDP
grow
th (%
)
y g g
World
Emerging Markets
5 Confidential
-4%
-2%
2000 2002 2004 2006 2008 2010-4%
-2%
Advanced Emerging World
0%
1%
2%
2010 2012 2014 2016 2018 2020
Advanced
Boost to growth
Growth in the emerging markets has not been uniform
10%
12%
Emerging market growth is picking up in 2017
0%
2%
4%
6%
8%
10%
GDP
grow
th
Emerging
Slow down Asia first
6 Confidential
-4%
-2%
%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019India CIS China S America
Slow down Asia first then Brazil and Russia
4/26/2017
4
Growth trends in NA and Western Europe started to weaken in 2016; hugegain in China caused by tax incentive. Softening looks set to go further in2017, but other markets to take up some slack.
World2.1%
4.6%
2015 2016
Global Vehicle market – 7th year of growth
North America
Asia-Pacific minus China
C&E EuropeWestern Europe
China
2%
6%2%
9%6%
-13%
0%
5%
12%
2015 2016
2015 20162015 2016
2015 2016
7 ConfidentialSource: LMC Automotive
ChinaSouth America-1%
-12%
2015 20162015 2016
-21%
Year-on-year change in Light Vehicle sales volume (thousands)
Asia-Pacific 3.3 mn
China +3,100kIndia +220k
Which markets moved most in 2016?
Western Europe
North America
C&E Europe
Italy +290kGermany +170k
Mexico +250k
Russia -180kPoland +70k
Czech Rep. +30k
8 ConfidentialSource: LMC Automotive
MEA
South America
+500kZero-500k +1,000k +1,500k
Brazil -490k
4/26/2017
5
The pre-2017 themes of expansion in North America, Western Europe andChina are expected to begin to dissipate this year, while signs of recoveryin Brazil and Russia are also expected to begin to emerge.
World
2.1%4.6% 2.4%
15 16 17F
Global Vehicle market, now for 8th year of growth
North America
Asia-Pacific minus China
C&E EuropeWestern Europe
China6%2% 0%
15 16 17F
9%6%
2%
15 16 17F
-13%
0%
2%15 16 17F
5%
12%
2%
15 16 17F
9 Confidential
ChinaSouth America
Source: LMC Automotive
-12%
6%
15 16 17F
-1%
2% 3%
15 16 17F
For the tyre market, emerging market vehicle sales build parc
Emerging markets• Rapid growth of vehicle sales
leading to parc growth (and hence replacement tyre sales growth) 50
60
600
700
Emerging v developed markets
growth)
Developed markets• Vehicle sales largely for parc
enhancement, little growth in vehicle parc.
• Ageing vehicle parc, average age of vehicles is increasing
20
30
40
50
LV sa
les (
mn
units
)
300
400
500
600
LV parc (mn units)
10 Confidential
With rising vehicle sales and an increasing parc, tyre market growth is dominated by the emerging markets
0
10
2000 2003 2006 2009 2012 2015100
200
Emerging DevelopedEmerging Developed
4/26/2017
6
Mature markets: steady LV replacement tyres sales growth
115
00)
13.2 4.0
Strong link between miles driven and fuel price
100
105
110
lace
men
t tyr
es sa
les (
2006
= 1
0
12.4
12.6
12.8
13.0
Mile
s per
veh
icle
('00
0)
2.0
2.5
3.0
3.5 Real fuel price ($ per gallo
11 Confidential
90
95
2006 2008 2010 2012 2014 2016
LV re
pl
US EU
12.0
12.2
2000
2002
2004
2006
2008
2010
2012
2014
2016
1.0
1.5
n)
Miles per vehicle Fuel price
Tyre sizes and speed rating
100%
60
70US Car tyre imports US tyre warranty: Speed rating
40%
60%
80%
Impo
rts (
%)
20
30
40
50
60
Tyre
war
rant
y
12 Confidential
0%
20%
2001 2004 2007 2010 2013
<14 14 15 16 17 17+
0
10
S/T H V WYZAll season Winter
4/26/2017
7
MHCV replacement tyres sales growth linked to GDP
35 55%
Fall in retreads has boosted replacement sales
USA115
00)
5
10
15
20
25
30
Repl
acem
ent S
ales
(mn
units
)
25%
30%
35%
40%
45%
50%
Retreads % Total Replacem
ent Sa85
90
95
100
105
110
lace
men
t tyr
es sa
les (
2006
= 1
13 Confidential
0
5
2000
2002
2004
2006
2008
2010
2012
2014
2016
20%
25%
ales
Replacement Sales Retreads (MTD)Retread %
70
75
80
2006 2008 2010 2012 2014 2016
MHC
V re
pl
EU US
China, expanding parc points to higher replacement sales
25,000 60,000
e)
30%
Vehicle sales 4,8,12 yrs ago (given 4 yr replacement cycle) point to substantially higher sales in 2017 and 2018
10,000
15,000
20,000
PC sa
les (
'000
uni
ts)
20,000
30,000
40,000
50,000
ativ
e ve
hicl
e sa
les (
4 ye
ar cy
cl
10%
15%
20%
25%
Growth (%
)
14 Confidential
0
5,000
1999 2002 2005 2008 2011 2014
0
10,000
2015 2016 2017 2018 2019 2020
Cum
ul
0%
5%
Vehicle sales (4 yr cycle) Growth rate
4/26/2017
8
But emerging markets miles driven per vehicle are falling
95
1004.4
35
40
Brazil China
60
65
70
75
80
85
90
Mile
s per
veh
icle
(199
6 =
100)
3.4
3.6
3.8
4.0
4.2 Real fuel price (R$ per litre)
15
20
25
30
35
'000
km
per
Veh
icle
15 Confidential
50
55
60
2006
2008
2010
2012
2014
2016
M
3.0
3.2
)Miles per vehicle Fuel price
0
5
10
2003 2005 2007 2009 2011 2013 2015
Brazil: replacement sales are recovering
Sale
s
es
LV replacement tyres MHCV replacement tyres
zil L
ight
Veh
icle
Rep
lace
men
t S
Braz
il M
HCV
Repl
acem
ent S
ale
16 Confidential
2011 2012 2013 2014 2015 2016
Braz
Moving Average Annual
2011 2012 2013 2014 2015 2016
Moving Average Annual
4/26/2017
9
Russia: also recovering
lions
)
ales
LV replacement tyres MHCV replacement tyres
V Re
plac
emen
t Tyr
e Sa
les (
Mill
ght V
ehicl
e Rep
lace
men
t Tyr
e Sa
17 Confidential20
06
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
MHC
VMoving Average Annual
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Lig
Moving Average Annual
Indian market has picked up
45
50 14
s)
35%
LV tyre production MHCV tyre replacement sales
15
20
25
30
35
40
45
Tyre
s (m
illio
ns)
4
6
8
10
12
plac
emen
t Tyr
e Sa
les (
mn
units
10%
15%
20%
25%
30%
Radial Tyre Production (%
18 Confidential
0
5
10
2000 2002 2004 2006 2008 2010 2012 2014 2016
SAAR Moving Average
0
2
2005/062007/082009/102011/122013/14
Rep
0%
5%
%)
Rep Tyre Sales Radialisation %
4/26/2017
10
With a growing parc
emerging markets lead replacement tyre market growthLV
repl
acem
ent t
yre
sale
s
19 Confidential
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Mature Emerging
Increasing volumes of tyres are traded
700
800
90
100
Tyre trade as grown at 4% per annum over the last ten years
300
400
500
600
00
LV ty
re tr
ade (
mn
units
)
50
60
70
80
90
MHCV tyre trade (m
n un
20 Confidential
0
100
200
2000 2002 2004 2006 2008 2010 2012 2014 2016
L
20
30
40
nits)
Light Vehicle MHCVExcluding intra EU trade
4/26/2017
11
Imported tyres are for the replacement market
80%
90%s
Imports are a particulary high proportion of replacement sales in the US
30%
40%
50%
60%
70%
rts %
repl
acem
ent t
yre s
ale
21 Confidential
0%
10%
20%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Impo
r
US LV US MHCV EU LV EU MHCV
Increasing use of duties to protect industry
US duties on China have switched importing origins and have global implications
14 35%US LV tyre imports
4
6
8
10
12
Mon
thly
impo
rts (
mn
units
)
10%
15%
20%
25%
30%
China % total (%
)
22 Confidential
0
2
2007-2009 Safeguarding duties(Sept 2009-Sept2012)
No Duties 2012-2014 Anti-dumping,countervailing duties
(Nov 2014-)
M
0%
5%
ASEAN China East Asia EUNAFTA South America China %
4/26/2017
12
Increasing use of duties to protect industry (continued)
The proportion of Chinese LV tyre imports has increased in the EUEU LV tyre imports
10
12s) 50%
60%
2
4
6
8
10
Mon
thly
impo
rts (
mn
units
10%
20%
30%
40%
50%
China % total im
orts
23 Confidential
02007-09 Safeguarding
duties (Sept 2009 -Sept 2012)
No duties (2012-2014)
Antidumping,countervailing
duties (Nov 2014 -)
0%
China East Asia ASEANRussia/Serbia/Turkey Americas OtherChina % total
US LV tyre capacity is expanding
40
50
ons)
10
20
30
40
mul
ativ
e Ca
mpa
city
(mill
io
24 Confidential
-10
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Cu
Bridgestone Continental Cooper GITI Tire Goodyear HankookKumho Sentury Sumitomo Toyo Other
4/26/2017
13
Europe capacity increases in low cost areas
10
15
20
25Ca
paci
ty (M
illio
ns)
Russia
10
20
30
40
50
ve C
apac
ity (M
illio
ns)
EU
-5
0
5
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Cum
ulat
ive
Michelin Continental Pirelli YokohamaCordiant Bridgestone Nokian
14
16
ns)
Turkey
-20
-10
0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Cum
ulat
iv
Apollo Tyres Bridgestone Continental CooperGoodyear Hankook Michelin NexenNokian Pirelli Other
14
16
ns)
Serbia
25 Confidential
0
2
4
6
8
10
12
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Cum
mul
ativ
e Ca
paci
ty (M
illio
Bridgestone Sumitomo Rubber Industries
0
2
4
6
8
10
12
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Cum
mul
ativ
e Ca
paci
ty (M
illio
Cooper Michelin
Tariffs affected US market in 2016
16
1 6
1.8
70%
80%
MHCV tyre imports Monthly MHCV tyre imports
6
8
10
12
14
Impo
rts (
mn
units
)
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Mon
thly
impo
rts (
mn
units
)
20%
30%
40%
50%
60%
70%
Import tariff on China(%
)
26 Confidential
0
2
4
2010 2011 2012 2013 2014 2015 2016China Non-China
0.0
0.2
0
Avg'
16F'
16 M A M J J A S O N DJ'1
7 F M
0%
10%
China Non-China Import duty
4/26/2017
14
Chinese tyre exports
IndiaWorld
LV By country
na L
ight
Veh
icle
Tyr
e Ex
port
s
Africa
East AsiaMiddle East
EuropeN Africa
ASEANS America
India
27 Confidential
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Chin
Moving Average Annual
-30% -20% -10% 0% 10% 20% 30% 40%
NAFTAE EuropeOceania
Change in Exports
Chinese manufacturers are expanding outside of China
50
60
(mill
ions
)
6
7
8
(mill
ions
)
LV MHCV
0
10
20
30
40
2013 2015 2017 2019 2021
Cum
ulat
ive
Cam
paci
ty (
0
1
2
3
4
5
6
2013 2015 2017 2019 2021
Cum
ulat
ive
Cam
paci
ty (
28 Confidential
Shandong Yinbao Tyre GroupShandong O'Green TyreShandong Linglong RubberSentaida GroupSailun TyreQingdao Fullrun TyreHangzhou Zhongce Rubber
Shandong Yinbao Tyre GroupShandong O'Green TyreShandong Linglong RubberSailun TyreHangzhou Zhongce RubberDouble Coin
4/26/2017
15
Summary: light vehicles
North America
South America
North America
South America
Vehicle sales Tyre sales
ASEAN
China
East Asia
India
Europe
Eastern Europe
Middle East
North America
ASEAN
China
East Asia
India
Europe
Eastern Europe
Middle East
North America
29 Confidential
-10% -5% 0% 5% 10% 15%
World
ASEAN
Change in LV sales (%)
2016 2017
-2% 0% 2% 4% 6% 8% 10% 12%
World
ASEAN
Change in LV tyre sales (%)
2016 2017
Summary: Trucks
North America
South America
North America
South America
Vehicle sales Tyre sales
ASEAN
China
East Asia
India
Europe
Eastern Europe
Middle East
North America
ASEAN
China
East Asia
India
Europe
Eastern Europe
Middle East
North America
30 Confidential
-15% -10% -5% 0% 5% 10% 15%
World
ASEAN
Change in MHCV sales (%)
2016 2017
-2% 0% 2% 4% 6% 8%
World
ASEAN
Change in MHCV tyre sales (%)
2016 2017