Tyre demand to remain sluggish in developing markets: Michelin

Michelin tyres
Michelin’s CEO is extremely confident about regaining its pricing power in the market despite being warned about the stiffer headwinds on raw materials.

Jean-Dominique Senard told CNBC, “We have increased our prices, notably in Europe recently, on all product lines – passenger cars, trucks and agriculture. This has been followed in the market so it will increase naturally the performance of the price mix and raw material effect in the second half. We are extremely confident for the whole year.”

The net profit of Michelin grew by 8.5 per cent during the first half of 2015. According to the French tyre manufacturer’s recently-revealed financial report, the revenue of the tyre maker increased to $11.6 million between January and June 2015.

Michelin recorded a 2.4 per cent hike in sales volume during the first half of 2015. In its official statement, the company claimed the sales of passenger car tyres and light commercial vehicle tyres has outpaced the market while the sales of commercial vehicle tyres improved slightly compared to market levels. The company has seen strong growth in mature economies but in newer markets, the performance was sluggish.

In the results statement, the company said the tyre demand is “expected to remain on an upward trend in mature regions but more challenging in new markets”.

Michelin is investing 1.8 billion euros to expand its reach in the emerging markets. However, the company is struggling to defend its premium pricing in competition with the budget offerings from rivals.

Commenting on the economic slowdown in China, Senard said, “(The slowdown) is not a surprise for us, we have seen that for some time in the market,” he said.

“The original equipment market is starting to show some slowdown. But, for us, the major market in China today is the replacement market, so we benefit from that growth which was nine percent during the first half,” he added.

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