Strategic differentiation intensifies: Japanese tire giants reshape the industry landscape

The financial reports of Japanese tire companies in 2024 were all made public last week. The total sales of the four Japanese tire companies are about RMB 1.1 billion, which is expected to account for about 30% of the global tire market share (the sales of the four Japanese tire companies accounted for about 23% in 2023).

The reason why Japanese tire companies are predicted to make great progress this year compared to 2023 is not only related to their higher sales, but also related to a series of major actions taken by Japanese tire companies in 2024. In particular, Yokohama has successively acquired the off-road tire businesses of two "big manufacturers" (Trelleborg and Goodyear) and has become the world's second largest off-road tire manufacturer. Its sales and brand influence are experiencing a terrifying rise...

23.2 billion acquisitions, Yokohama impacts
The top five According to the exchange rate in February this year, Yokohama's two major business acquisitions since 2022 have cost a total of about 23.2 billion yuan (US$3.205 billion).

From 2023 to 2024, Yokohama's tire business revenue was RMB 42.433 billion and RMB 47.527 billion, respectively, and profits were RMB 4.463 billion and RMB 6.167 billion, respectively; the two acquisitions accounted for 26% of the revenue in the two years, which is twice the total operating profit in the two years. At present, Yokohama's aggressive acquisition measures have a high burden on its profits. This is why Yokohama announced the closure of two factories in 2025 - one in Europe and one in North America.

Once almost falling out of the top ten in the world (ranking in the top 75 in 2022 fell to ninth), suddenly within two years, it took on sales orders of about RMB 14 billion (Goodyear's off-road tire business sales in 2023 were US$678 million, and Trelleborg Wheel Systems' sales in 2022 were 13.7 billion Swedish kronor), the pressure can be imagined.

If it cannot be smoothly integrated with the new business, the 14 billion order sales may turn into higher debt in an instant. Therefore, Yokohama needs to stabilize its current performance-using brand influence to increase the proportion of off-road tire business supporting Yokohama's own off-road tire business, rather than simply expanding production capacity.

Therefore, after announcing the completion of the acquisition of Goodyear in 2025, Yokohama immediately began to reduce the number of factories, reduce labor costs, and reduce everything to a controllable range as much as possible. In particular, Yokohama also took over the brands of the two most influential companies in the off-road tire market. The increase in market share and brand value once again helped Yokohama to win more profits.

Do you think this move is familiar?
Is it very similar to the "routine" of Japanese tire giant Bridgestone in the 1990s and Chinese tire giants after 2015-increasing tonnage through acquisitions and then improving status. But after 2025, will it still be effective to copy this operation?

Rapid expansion, is it a blessing or a curse
At present, it is still effective. Admittedly, the off-road tire market is in a mess in 2024, but because the competition in this market segment is relatively low, it still leaves a high profit for "active companies".

In 2024, Yokohama's tire business grew by 11.36% year-on-year, but Yokohama's tire business profit increased by 38.18%, far exceeding its sales growth. Although Yokohama also pointed out the increase in sales, the increase in the sales share of tires 18 inches and above, and the contribution of price increases to profits, we cannot ignore that the growth of the off-road tire business is the biggest support for Yokohama's profit growth! Michelin and Bridgestone have disclosed the profit margins of their off-road tire businesses in their respective financial reports, 14.6% and 22.3%, both higher than the profit performance of other businesses.

If tire companies want to make higher profits in the road tire market, they need to be favored by automobile OEMs, continuously increase their market share in high-value markets, and "roll" reputation in the fleet; but in the off-road tire market, the starting profit margin is as high as 15%.

Yokohama has become the second largest tire manufacturer in the global industrial and port machinery market through the acquisition of Trelleborg Wheel Systems, and with the acquisition of Goodyear's off-road tire business, Yokohama's position in off-road tires continues to improve! This also makes up for Yokohama's "insufficiency" in tire matching in the past two years.

In fact, before 2020, Yokohama's matching share in the Chinese tire market was "out of reach" for several other Japanese tire brothers, but now, Yokohama's matching share has loosened - in the matching market, Yokohama is being surpassed.

Stable and conservative, survival or victory
Admittedly, the sales of Yokohama's matching models have been good in the past two years, making its matching sales still "prosperous", but in fact, research data shows that in the new car market, at least in the Chinese new car market, Bridgestone and Dunlop seem to have a higher share. Whether it is the Beijing International Auto Show or the Chengdu International Auto Show, the matching quantity of Bridgestone and Dunlop is higher than that of Yokohama.

In fact, in terms of matching share in overseas markets, Dunlop's parent company Sumitomo Rubber may climb higher in 2025. Why? Because Dunlop's European business was bought back by Sumitomo Rubber. In October 2015, after the 16-year alliance between Sumitomo Rubber and Goodyear broke down, Dunlop's European business was "awarded" to Goodyear.

Unfortunately, Dunlop has always been regarded as a high-end brand in the European market, and its price is relatively high. Therefore, after 2020, facing the downgrade of the global tire market, its sales share has been continuously encroached by Asian high-quality and price-performance brands, and it has not brought any substantial benefits to Goodyear. Therefore, when Goodyear proposed a transformation plan in 2023, the sale of Dunlop's European business was included in the plan. Although some people speculated at the time that Sumitomo Rubber would take the opportunity to buy back Dunlop's European operating rights.

But in fact, it took a year to facilitate the deal, and the news was released after Sumitomo Rubber announced the closure of its only factory in the United States. We can even regard Sumitomo Rubber's closure of the factory and the purchase of Dunlop as a kind of "equivalent exchange" - abandoning one business and picking up another task - closing the money-losing factory and regaining market share in Europe.

This "equivalent exchange" also once again reflects a major characteristic of Japanese tire companies - "seeking wealth and stability". "Stability" has always been the core of competition for Japanese tire companies. Even though Dunlop, a former British brand, is extremely passionate in advertising creativity, product promotion and product performance, "stability" is still the background. In terms of quality, in the past three years, Yokohama and Toyo have announced multiple recalls, but only Falken under Sumitomo Rubber has announced a recall.

In terms of production capacity, Sumitomo Rubber has not adopted a radical capacity expansion strategy. Unlike Yokohama's construction of factories in Mexico and Hangzhou in 2024, Sumitomo Rubber has been reducing its production capacity. The Hunan factory has taken the initiative to reduce production and the US factory has been closed. Sumitomo Rubber has always been "calculating" on production capacity - finding the most reasonable production capacity layout.

Even if it bought back Dunlop's European business, Sumitomo Rubber has shown great patience. After waiting for a year, it only bought back Dunlop's operations in Europe for US$701 million, accounting for 10% of its total sales, but it exceeded its operating profit for the whole year of 2024.

However, if calculated based on the turnover of Dunlop's European business in 2022 disclosed by Goodyear, Dunlop can get at least about 6 billion yuan in orders in 2025 (in 2022, Dunlop sold 532 million US dollars of passenger car tires and 201 million US dollars of commercial tires in Europe).

However, even so, Dunlop is likely to be surpassed by Yokohama in 2025. After all, Yokohama plus Goodyear's off-road tire sales are likely to exceed 60 billion yuan in 2025. This also means that Sumitomo Rubber's current stability is just "stability to rise/survive" rather than "stability to win".

Changes in the Japanese tire landscape in 2025
After Yokohama and Sumitomo Rubber each bit off a piece of Goodyear, the Japanese tire business landscape that has been maintained for decades seems to be about to change. Can Sumitomo Rubber still maintain its second place? Can Yokohama enter the top five in the world? How will the global tire landscape change in the next three to five years as the two tire companies compete? And as a new round of global tire waves has begun to surge, where should Chinese tire companies go?