Putting the company’s (and the industry as a whole’s) difficulties into perspective, Deutsche Bank analysts summed up the worst of the current volumes like this: “eight times worse than the worst year over the last 30 years (1991).” North America, Brazil and Japan suffered 53.5, 24.1% and 65.2% falls in truck tyre OE demand respectively in May, with China the only market to avoid the pain – growing 2.6%. Truck tyre replacement sales faired better in most markets, albeit still falling between 12.8% and 23.3% in four of the five covered zones. China remained flat.
Despite the depressing figures, Deutsche Bank analysts were optimistic that the worst is over: “Since sell-out demand is not as bad, dealers destocking can’t last forever. And therefore sell-in and sell-out market trends will converge soon. Lastly, May is a relatively small month for the industry when June is much more important. For example, June represents a high 25% of Michelin’s first half volumes.”
Morgan Stanley analysts were similarly positive: “Michelin’s published May tyre market data was in line with our expectations. While still far from sustainable levels of demand…(sell-in) showed small signs of improvement. Assuming stable share, Michelin volume is on pace for a decline in line with our estimate of -19% in the second quarter.”
Michelin’s data shows that passenger car tyre OE demand fell 28.2% in Europe, 52.4% in North America and 9.6% in China compared to May 2008. Replacement sales in Europe and North America were down 15.1% and 9.8%, respectively, while China’s replacement market was seems to be the only one still growing with sales up 2% in May 2009 compared to a year ago. The Europe figure quoted includes CIS countries, which were down 37.1% taken in isolation. When this figure is subtracted from the rest of the European markets replacement sales were down ‘only’ 10.8%.
Year-to-date figures were similarly bad with pass-car OE demand falling 36.4% in Europe, and half what it was in North America in the first five months of 2008. However, the year-to-date figures also highlight China’s strong and continued growth. Between January and May 2009 Chinese OE tyre demand grew 14.3%, while the country’s replacement demand also grew 11.2%. By comparison Europe’s year-to-date pass-car demand fell 12.3% (down 7.2% excluding the CIS; the CIS alone experienced a 41.5% drop) and North America was down 11.9%. (Tyres & Accessories/Staffordshire, U.K.)
