The automobile industry is one of the dominating sectors because many economic activities rely on and are linked to automobile production. If you include suppliers, car services, garages or retailers, a total of about 5 million employees depend on the success of the automobile industry. With changing technologies, production concepts, strategies and products, the automobile industry is often an initiator of innovations in other related industries as well.
As the world tries to come out of economic recession, the first sector to witness positive movement has been the Automobile sector and since its linked to related sectors like tire industry, plastics industry and metal processing, all the sub sectors are slowly witnessing a silent revival. As more and more people look at buying automobiles slowly, the tire industry is also set to attain a positive movement from the pits, where it has been for most of last year. The recession had people reducing spending across the board, which meant that they had been putting of those new tires on hold until things start to look a little better on the economic front. Now as the economy is moving out of the red slowly, tire sales are witnessing a welcome revival even better than the Automobile companies and a lot of second hand car owners have also been investing in the new set of tires instead of buying a new automobile altogether.
Tire shipments in 2010 are projected to increase by approximately 3 % or approximately 7 million units to 267 million units, according to the Rubber Manufacturers Association. Total shipments experienced an 8 % drop in 2009 to 259.7 million units. The increase in tire shipments reflects the onset of the economic rebound, an increase in vehicle miles traveled and a slight up tick in auto sales. As a result, this rebound is projected to extend into 2011, reaching approximately 275 million units as the economic recovery gathers momentum.
- Tire companies were first in the early on 20th century, and grown in partnership together with the automobile business. In the present day, above 1 billion tyres are created annually, in over 400 tire factories, with the three top tire makers commanding a 60% total marketplace share.
- The US tire manufacturing industry alone consists of about 100 companies with combined annual revenue of about $15 billion. The industry is highly concentrated and the top four companies generate more than 75 % of revenue. Major companies include Goodyear, Bridgestone, Michelin, and Cooper.
- Tire manufacturing has become extremely technical and forward-thinking as manufacturers look to push the boundaries of what can be achieved through new technologies. Whether it’s improvements in fuel economy, handling performance or safety, technological developments in the tire world are making a big difference.
- As the world fights strong economic recession, people are more prone to buy and use older cars rather than buying new ones. No matter if the vehicle is old or new, the need for tire remains a constant and with number of second hand vehicle sales increasing and as compared to new vehicles, the worldwide consumption of tires is estimated to be more than automobiles.
- With developing nations churning the growth engines of the world, commercial vehicles (vans, utility and light trucks) are much in demand in both developed and developing nations; such vehicles require both more and larger tires than passenger cars.
Correlation Of Tires And Rubber: In the history and the application of various materials, few have made as large an impact globally as natural and synthetic rubber. The source of the material stretches from plantations in Malaysia and Indonesia to factories on all continents. The making of rubber into tires and nontire goods involves a series of sophisticated manufacturing processes. The finished products are then distributed through thousands of warehouses and dealers in large cities and small villages, practically in every country.
Rubber Demand And Supply: Rubber originates from two distinct sources. Natural rubber comes from tropical plants. Major producing countries are Malaysia, Indonesia, and Thailand. Both small and large rubber plantations supply the liquid latex. Synthetic rubber is manufactured in various plants around the globe to different specifications, although generally attempting to emulate the physical properties of the natural kind.
Because rubber is used widely in both tires and nontire applications, its future is tied to the global economy. The growth rate for rubber should outpace those for motor vehicle production and motor vehicle registration in the next ten years. Nontire applications account for the majority of rubber usage at 52 to 54 percent of the total, with little change expected.
Tires Supply And Demand: The demand for rubber in tire applications will be hindered by longer tire lives. Drivers now expect longer tread life, and tire companies have responded. However, this means slower growth for replacement tires. Another negative factor is the slowing in the rate of growth in motor vehicle registrations, especially in industrialized nations. But positive signs are evident as well. Commercial vehicles (vans, utility and light trucks) are much in demand in both developed and developing nations; such vehicles require both more and larger tires than passenger cars. There is also strong demand for performance or specialty tires in the USA; such tires not only require more elastomer per unit, but they also have a shorter tread life than normal tires.
Tire Manufacturing Companies Listed On NYSE:
- Bridgestone Corporation (BRDCY): BRIDGESTONE CORPORATION is a Japan-based manufacturing company. The Company has two business segments. The Tire segment is engaged in the manufacture and sale of tires and tubes for passenger automobiles, trucks and buses. Bridgestone was ranked the No.1 tyre manufacturer in the global tyre market, followed by Michelin second, Goodyear third, and Continental fourth as of January 2009. # Mkt cap 14.31B # P/E 4.22
- Firestone: In 1988, Bridgestone purchased the Firestone Tire and Rubber Company. The Firestone Tire and Rubber Company and Bridgestone Tire Company Ltd USA were amalgamated in 1990 and became "Bridgestone Firestone North American Holdings Ltd". In order to increase the Firestone subsidiary's brand awareness.People looking for Firestone may look at Bridestone.
- Cooper Tire & Rubber Co.(CTB): Cooper Tire & Rubber Company is a manufacturer of replacement tires. Cooper focuses on the manufacture and sale of passenger and light truck replacement tires.
- # Mkt cap 1.17B # P/E 10.60
- The Goodyear Tire & Rubber Company (GT) is a manufacturer of tires. The Company, along with its United States and international subsidiaries and joint ventures, develops, manufactures, markets and distributes tires for applications. # Mkt cap 2.65B # P/E 16.72
- Michelin SCA (MCGFF.PK): Michelin SCA (Compagnie Generale des Etablissements Michelin SCA) is a France-based company that manufactures and sells tires for a variety of vehicles, publishes maps and guides, and offers digital products and services. # Mkt cap 9.37B # P/E 13.19
- Titan International, Inc. (NYSE:TWI): Titan International, Inc. (Titan) through its subsidiaries, is engaged in the manufacturing of wheels and tires. # Mkt cap 413.57M
The Dow Jones US Tire Index has been falling since end July and is reaching a bottom soon in a short term and would have a double bottom if it reaches the 40.00 levels. With a global economic revival on the cards, the only way the index can now move after its recent bottoms is upwards.
Best Performing Stocks of the DJ US Tire Index over the last one year:
Symbol Company Name Percent Change
AMTY Amerityre Corporation 43.38%
CTB Cooper Tire & Rubber Company 38.16%
TWI Titan International Inc 34.42%
BRDCY BRIDGESTONE CORP 1.96%
GT Goodyear Tire & Rubber Co -38.71%
Tire Production Process: The basic tire-making process consists of mixing rubber and various additives in a large mixer called a Banbury machine, then cooling the mixture, rolling it flat, and cutting it into strips. Tires are assembled as layers of rubber strips along with reinforcing materials and adhesives on a tire-building machine to produce a green (uncured) tire. The tire is then heated in a curing press at a high temperature, which vulcanizes the rubber and produces the final shape. The process is capital-intensive, uses a fair amount of energy, and produces polluting vapors. The primary raw materials used are synthetic rubber, carbon black, natural rubber, various chemicals and reinforcing components such as steel wire, steel cord, and polyester. Both synthetic rubber and carbon black are derived from petroleum or natural gas. Other components used in manufacturing synthetic rubber are styrene and butadiene. Natural rubber is collected as sap from rubber trees on large plantations in Indonesia, Malaysia, Thailand, and Brazil.
As many as 200 separate raw materials are used in the construction of one tire. The grooves and tread sipes on the shoulder of the tire are specially designed to channel water away from the surface of the tire, maintaining maximum wet grip. Different rubber compounds are used for tires to make them suitable for different vehicles and driving conditions. For example, racing cars have tires that can work at very high temperature ranges with optimum grip, enabling prolonged usage at high speeds on the track. These tires wear more rapidly than typical road tires that are balanced to provide optimum steering, braking, road holding and wear capabilities.
Top Global Tire Manufacturers:
Pirelli: Pirelli tire is the world's fifth largest operator in the tire market and is involved in the design, development, production and marketing of tyres destined for various types of vehicle. Pirelli tires are synonymous with quality, emotion and ultimate performance. Pirelli is one of the world’s best known Italian brand names, thanks above all to the widespread distribution of the tires produced in 24 manufacturing plants in 12 countries and a commercial presence in more than 160 countries. In particular, Pirelli is the world leader in the field of tires for high performance cars, in both the original equipment and aftermarket segments. Pirelli's tire Sector has a marketing network covering over 120 countries around the world and boasted sales of over Euro 2.831 billion in 2001.
Pirelli & C. SpA: Pirelli & C. SpA is an Italy-based holding company of the Pirelli Group's that operates worldwide.
# Mkt cap 2.68B # P/E 49.84
Michelin: The Michelin Group is active on all continents and in more than 170 countries, from China to Brazil and from The United States of America to Germany and Russia. Michelin manufactures and sells tyres for all kinds of vehicles, including cars, vans, 4X4, SUV and many more. In 2006, Michelin produced 190 million tyres and continues to provide industry leading technologies in over 170 countries around the globe. The company was founded in 1889 by the Michelin Brothers and remains in family ownership to this day. It operates in over 170 countries and has manufacturing interests throughout the world. It was the first western tire manufacturer to invest heavily in China and is in partnership with India's Apollo Tires to develop the Radial tire market on the domestic front.
Michelin SCA: Michelin SCA (Compagnie Generale des Etablissements Michelin SCA) is a France-based company that manufactures and sells tires for a variety of vehicles, publishes maps and guides, and offers digital products and services.
# Mkt cap 9.37B # P/E 13.19
Continental Tyres: Continental Tires was founded in Germany in 1871 and has been making tires for over 130 years. Since then, it has grown to become one of the world's major automotive component suppliers and the company's comprehensive know-how today includes the manufacture of tires for all kind of vehicles.The German player in the global tire market has been through the financial mill in the last few years, but has regained some of its old stability by focusing on its core business. The tires it produces are amongst the best in the world and are fitted as OE on most European manufactured cars, including BMW, Mercedes and Volvo.
Continental AG: Continental AG is a Germany-based automotive industry supplier.
# Mkt cap 9.70B
Bridgestone Tyres: Based in Japan, Bridgestone is the world's largest tire and rubber company. Operating on a global scale, the company is at the forefront of tire and rubber technology. Bridgestone was founded in the 1930's by Mr Shojiro Ishibashi, a forward-thinker who realised that the road to success in global markets lay in an English brand name. He took a literal translation of his own name, "Stonebridge", and created the Bridgestone brand. The company now employs over 105,000 people in 150 countries and has production facilities and test and research centres around the world. The Bridgestone tire founder, Mr. Ishibashi, produced his first tire in Japan in 1930, soon after Bridgestone tyres were being sold throughout Europe. Mr. Ishibashi said "Serving society with superior quality" is the company motto. This motto and the mission remain the same today.
# Mkt cap 1.23T # P/E 14.66
GITI: GITI tire Group, headquartered in Shanghai, is China's largest manufacturer and supplier of top quality tires, with five manufacturing plants in that country. It produces a comprehensive range of GT Radial brand tires including car, van, SUV and 4X4. The Company distributes its products through an extensive sales network in China and exports to over 80 countries around the World.
Giti Tire Corporation (Public, SHA:600182)
# Mkt cap 2.82B # P/E 19.61
Goodyear: By volume, Goodyear Tire and Rubber Corporation is the largest tire manufacturer in the world with interests in Dunlop and many other regional and second line brands around the globe. Goodyear is involved in every area of the rubber market and was founded by the Seiberling brothers who used the name of the American discoverer of the vulcanising process as the brand for their company. The Goodyear tire & Rubber Company was founded in the late 19th century by 38-year-old Frank Seiberling, with just 13 workers Goodyear production began on the 21st November 1898. Today, Goodyear is one of the world's leading tire companies; No. 1 tire manufacturer in North America and Latin America.
The Goodyear Tire & Rubber Company (GT) # Mkt cap 2.65B # P/E 16.72
Dunlop: Dunlop opened its first tire plant in Dublin, 1889. Since then, Dunlop has grown to become one of the world’s biggest and most respected tire brands. By the 1920s, Dunlop had developed tyres for cars capable of speeds over 200 mph - heralding a longstanding relationship with Motorsport.
Goodyear Dunlop Tires North America knows its way around the tire industry. The company, a part of The Goodyear Tire & Rubber Company, makes tires bearing the Dunlop brand name.
Firestone: The Firestone legacy of motorsports accomplishments began more than nine decades ago when Harvey Firestone decided to showcase his tires on the race track. Since then, the Firestone tire brand has appeared in thousands of competitions around the globe, recording a remarkable variety of wins and honors.
In 1988, Bridgestone purchased the Firestone Tire and Rubber Company. The Firestone Tire and Rubber Company and Bridgestone Tire Company Ltd USA were amalgamated in 1990 and became "Bridgestone Firestone North American Holdings Ltd". In order to increase the Firestone subsidiary's brand awareness.
Other Tire Majors On Exchanges Worldwide:
Canadian Tire Corporation Limited: Canadian Tire Corporation Limited (Canadian Tire) is a Canada-based company, which offers everyday products and services.
# Mkt cap 4.72B # P/E 15.92
Hankook Tire Co., Ltd.: Hankook Tire Co., Ltd. is a Korean manufacturer of tires. The Company produces and distributes tire products, such as passenger car radials.
The Yokohama Rubber Company, Limited: The Yokohama Rubber Company, Limited is a Japan-based manufacturing company. The Tire segment mainly offers tire tubes, aluminum wheels and automobile products for cars, trucks, buses, construction vehicles and industrial vehicles.
# Mkt cap 148.12B
JK Tyre & Industries Ltd.: JK Tyre & Industries Ltd. is an India-based company engaged in the business of manufacturing of automotive tires, tubes and flaps.
# Mkt cap 6.71B # P/E 5.62
MRF Limited: MRF Limited is an India-based company. The Company is engaged in the manufacturing, distribution and sale of tyres for various kinds of vehicles.
# Mkt cap 31.23B # P/E 21.77
Tire Negatives: Lack Of Waste Management
One of the key issues facing governments and environmental agencies is the increasing problem of solid waste management -- in this case, the disposal of waste tires. The debate is most intense in nations or regions with high car densities: USA, Japan, and Western Europe. To date, no comprehensive solution has come forth. Waste tires can be shredded and incinerated as a fuel source or used as filler material for asphalt. Waste tires are also being used as artificial reefs in the Caribbean and elsewhere to encourage underwater aquatic life. But none of these applications is sufficient to absorb the huge quantity of discarded tires, which suggests that further regulation is imminent.
Tire Industry Future Projections
Tire shipments in 2010 are projected to increase by approximately 3 percent or approximately 7 million units to 267 million units, according to the Rubber Manufacturers Association. Total shipments experienced an 8 percent drop in 2009 to 259.7 million units. The increase in tire shipments reflects the onset of the economic rebound, an increase in vehicle miles traveled and a slight up tick in auto sales. As a result, this rebound is projected to extend into 2011, reaching approximately 275 million units as the economic recovery gathers momentum.
Replacement Passenger Tires - The sluggish economy, coupled with consumers looking to extract more miles out of their tires, contributed to a decline of 4.3 million units in 2009, representing a 2.2 percent decrease for a total of 189.5 million units. However, this sector is forecast to increase by nearly 1.7 million units in 2010, or approximately 1 percent, as the measured economic recovery gains hold and the number of vehicle miles traveled increases.
Commercial Truck Tires - This market declined to 12.9 million units in 2009, a decrease of nearly 2 million units or 13.2 percent. However, this market will realize an increase of approximately 600,000 units in 2010 as the economy picks up, and more goods are shipped.
Disclosure: No positions