Michelin Posts Sales Gain Despite Volume Drop

Oct. 26, 2023

Michelin Group's net sales during the first nine months of the year totaled $22.3 billion, up 2% year-over-year. But its tire volume dropped 3.6%.

The volume decline reflected "market destocking and (Michelin's) focus on value-accretive segments," say Michelin officials.

The passenger and light truck tire markets "were stable versus 2022 as robust OE demand in most regions off-set slightly negative (replacement tire) demand, dampened by destocking in Europe and the Americas."

Michelin officials report that "inventory levels are back to normal in most regions, except for winter tires in Europe" and demand for 18-inch and larger tires "is steadily expanding."

Outside China, "truck tire markets ... dropped 5% due to substantial dealer and B2B fleet inventory reductions. OE demand remained robust in Europe and North America. In replacement markets, destocking is expected to be completed by the end of the year."

The mining and OE ag tire markets "were dynamic" during the first nine months of 2023 "and soft in construction, (replacement) agricultural and two-wheel tires," according to Michelin officials.

"Our group is reporting solid sales revenues in a complex market environment," says Florent Menegaux, CEO of Michelin Group. "We are continuously tightly steering our operations and adapting to the market's shifting needs."

A deep dive into PLT

In the OE passenger and light truck tire segmens, "worldwide demand eased back at a slight 1% in the third quarter, as the ongoing rebound in Europe (up 4%) and North America (up 3%) helped to cushion the 7% slowdown in China," say Michelin officials.

Gains in Europe - which, during the first nine months of 2023, totaled 11% - were driven by a return, "more or less," to normal automaker inventory levels versus the same period last year, "when demand was severely impacted by automaker supply shortages and the outbreak of the war in Ukraine."

During the first three quarters of 2023, markets in North and Central America enjoyed 9% growth. "Tire demand remained strong in July and August, as automakers continued to replenish inventory, but fell 10% year-on-year in the month of September, as strikes called at a number of auto plants weighed heavily on monthly output.:

China "ended the first nine months up 2%, despite a 7% decline in the third quarter. The latter reflected the particularly high prior-year comparatives, which were boosted by the lifting of health restrictions late in the second quarter of 2022 and by government new car rebates." 

On the replacement PLT side, there was a 1% drop in demand during the first nine months of the year.

"The European market ended the period down 6% overall, with a 4% decline in the third quarter alone, when growth in the all-season segment failed to offset the more than 10% year-on-year drop in winter tire sell-in."

The North American market contracted by 4% during the first three quarters, despite a 6% gain in 3Q. "Demand is continuing to trend upwards in a resilient economy, with more favorable prior-year comparatives emerging in September."

In China, the replacement passenger and light truck tire segments climbed 13% during the first nine months and rose 8% during the third quarter alone. "Growth is being driven by the ongoing rebound in local demand as more and more people travel domestically."

Truck tire market performance

Global demand for OE and replacement commercial truck tires declined by 8% during the third quarter and 5% during the first three quarters.

"Markets in Europe (up 8%) and North and Central America (down 2%) remained generally bouyant over the first nine months, albeit from high prior-year comparatives," say Michelin officials. "The was particularly the case in North America, where, despite some persistent truckmaker difficulties with supply and labor shortages, demand was supported by truck purchases ahead of the introduction of a new greenhouse gas emissions standard in 2024."

In South America, demand ended the first nine months down 23%, the result of extensive new truck buying that took place in 2022.

In the replacement channel, the global commercial truck tire market, excluding China, declined by 9% in 3Q 2023 and 7% during the first three quarters. 

"The fall-off was especially steep in Europe, with a 9% year-over-year decrease over the full nine-month period. The economic slowdown in the region has led to a glut of overland freight capacity."

Replacement demand in North and Central America fell 17%, "a performance that reflected particularly high 2022 comparatives and masked the market's return to 2021 levels," with dealer and fleet inventories high during the first nine months.

South America demand rose 4% "and remains robust."

Specialty tire segments

The ag and construction tire segments "continue to be driven by OE sales, while replacement demand is being hit by dealer inventory drawdowns, which are set to continue through the end of the year," say Michelin officials.

Demand remains high for mining tires, driven by "a still-expanding ore market, impelled by growing demand for metals to support the energy transition."