OTR tires slam on the brakes

Off-road tires, which were still hotly discussed in 2023, have been silent in 2025. After the huge losses of tire giants in engineering tires and agricultural tires, off-road tires have become "rotten meat" that tire companies will never touch.

Off-road tire losses exceed 10 billion

Whether it is Titan International, a "unique" giant in the off-road tire industry, or Michelin and Bridgestone, the recognized leaders in the tire industry, the sales of off-road tires in 2024 are a mess.

Titan International only achieved a 1.3% increase in sales after acquiring another off-road tire giant, Karst, in 2024, which is enough to illustrate the "downturn" in the engineering tire, industrial tire and agricultural tire markets. The combined profits of the two companies still showed a huge loss-a net profit loss of US$5.6 million, or RMB 40 million, which further illustrates the bleak operation of the off-road tire market. This is the worst year for Titan International in the past four years. In 2022, the manufacturer's operating profit once reached US$205.8 million (RMB 1.496 billion).

In 2 years, from earning 1.5 billion to losing 40 million, we can see that the demand for off-road tires is plummeting. And it is not the only one that is so bleak. The off-road tire products of giants such as Michelin and Bridgestone are also not selling well!

Michelin's sales in the industrial tire, engineering tire and agricultural tire markets have fallen by about 9.1%; the decline in sales has led to a 9.4% decline in operating income in this business segment; operating profit has fallen by 23.5%. Bridgestone's sales in this business segment fell by 1%.

It has become common knowledge among tire companies that off-road tires cannot be sold. Michelin said that in 2024, its supporting business for agricultural and construction activities performed poorly, and mining tire sales were also affected, with sales and operating profit margins facing a temporary decline. Michelin is also a tire manufacturer with a high market share in this field. Michelin's performance is so sluggish that other tire companies that "pick up food" are inevitably in a worse situation. Not only is the current situation bad, but tire companies' expectations for the future are also bad.

Selling off business, closing factories and reducing production

Poor expectations have caused tire companies to start "crazy" cutting spending on OTR business. So far, four off-road tire manufacturing plants are facing production cuts or even permanent closures. Bridgestone announced a reduction in the production capacity of its Des Moines agricultural tire plant in the United States; after three consecutive years of large-scale acquisitions of global specialty tire businesses, Yokohama suddenly announced the closure of the specialty tire manufacturing plant in Hadera, Israel, the off-road tire plant in Prague, Czech Republic, and the agricultural tire manufacturing plant in Spartanburg, South Carolina, USA at the end of 2024.
And Goodyear, a strong supporting company in the field of mechanical engineering, simply sold its off-road tire business directly.

In 2023, Goodyear's off-road tire business sales were US$678 million, accounting for 4% of its total tire revenue. In 2024, it sold this business to Yokohama for US$905 million-no longer having to worry about this 4% business share. The continued sluggish market has made tire companies very worried about the development of the off-road tire business. Especially in the field of off-road tire supporting, which the giants are proud of, the downturn of the OEMs has made tire companies very worried.

Off-road tires are trapped in many ways

In the first half of 2024, the revenue of XCMG, a well-known Chinese tire company, was 49.63 billion yuan, a decrease of 3.21% from the same period in 2023; in the third quarter, the year-on-year decline in revenue continued to expand. In the first three quarters, XCMG's sales revenue was 68.73 billion yuan, and the decline widened to 4.11%.

This is one of the leading companies in China's engineering machinery industry, the global leader in cranes, and the engineering machinery company with the largest market share in mobile cranes. The decline in revenue also reflects the sales challenges currently faced by the entire industry.

Many machinery companies have made pessimistic predictions about their expectations for 2024 based on the changes in market demand in 2023, but 2024 is worse than expected. The situation in earthwork, agricultural machinery, and mining industries is more severe than expected-the domestic market is down from a low level, and the growth of overseas markets has stalled.

The fluctuation of orders in the machinery industry naturally cannot bring a chance of "resurrection" to the off-road tire market. This is why tire giants generally stated that mechanical engineering supporting orders in 2024 will "drop sharply".

And it is not only the supporting business that has suffered a sharp drop. More Chinese tire companies are participating in the OTR competition, which also makes foreign companies often feel pressure when replacing off-road tires.

In fact, the situation mentioned by some giants in the conference call that "Asian high-quality and price-performance tires are swallowing up a higher share" in the passenger car and truck and bus tire markets has also spread to the specialty tire market. Moreover, in this market, foreign companies are not facing ordinary Chinese tire companies, but strong companies with rising brand power and ranking in the first echelon of Chinese tires.

The competition is fierce, and tire giants are "unable to sleep and eat"

Before 2010, even if the demand for off-road tires also experienced a bottoming cycle, they would not be worried, because for them, as long as they wait until the off-road tire market returns to the upward cycle, they will resume the double increase in profits in this business segment. But after 2020, things are different.

Domestic tire companies have made rapid progress in this field. Not only are there many tire companies specializing in this field, but almost all domestic first-tier tire companies and listed tire companies have been involved in this business without exception.

What are the characteristics of Chinese tire companies entering the track? Of course, it is to use the advantages of high quality and price ratio to quickly seize market share. It can be said that from the matching to replacement of the special tire market, Chinese tire giants have participated in the competition. At the same time, Chinese tire companies have thoroughly implemented the hard truth that "tonnage determines status" and continuously accumulated production capacity.

Zhongce acquired Tianjin International United Tire and Rubber Co., Ltd. to expand its global special tire market share. At the same time, it plans to invest 854 million yuan in the industrial chain upgrade and transformation of the Tianjin factory, and increase the development and production of all-steel engineering tire products; Sailun has increased its off-road tire production capacity by 37,000 tons in Indonesia; the planned production capacity of Prinx Chengshan's new off-road tire project is 84,000 engineering tires and 10,000 giant tires; Fengshen Tire announced a "high-performance giant engineering radial tire capacity expansion and efficiency improvement project" of 1.494 billion yuan in 2024, and it is expected to increase 20,000 sets of giant OTR tires. Why are Chinese tire companies still so active when the market is bottoming out? The answer is obvious, there is money to be made.

There is still money to be made in the OTR market

Because of the high technical threshold, there are not as many players in this market as in other tracks. Even if sales are constantly suppressed by reality, the profits of off-road tires cannot be underestimated. Michelin's annual report shows that the operating profit margin of its off-road tire business will be as high as 14.6% in 2024. Domestic listed tire companies also stated that the profits of this market are an important profit support (it can be understood that the profit contribution of this category of products is extremely high). Therefore, this is also the reason why most tire companies still stick to this business and slowly climb up from the bottom under the cooling in the second half of 2023.