The tire industry has shown improved profitability this year as the quarterly average price of core raw material rubber declined, factoring in inventory cycles. In Q3 2025, the sector reported total operating revenue of RMB 30.7 billion, up 11.8% YoY and 7.4% QoQ, while net profit attributable to shareholders fell 22.3% YoY but rose 16.1% QoQ to RMB 2.3 billion. Against a backdrop of consumption downgrading, overseas tire giants face sluggish revenue growth, whereas domestic firms continue expanding sales. With Chinese tire makers advancing their second wave of global expansion, enhanced risk resilience and new growth opportunities are expected post-globalization.
**Key Insights from Sinolink Securities:** 1. **Demand Recovery & Profit Improvement** Semi-steel tire production weakened YoY since April due to tariffs and trade policies, while full-steel tire demand rebounded, with monthly operating rates exceeding prior-year levels by over 4 percentage points since June. Export-wise, passenger vehicle tire shipments remained flat YoY at 266 million units in the first three quarters, while truck/bus tire exports grew 4% to 98 million units. Q3 saw passenger tire exports edge up 0.7% to 93.83 million units, with truck/bus tire exports jumping 6.6% to 34.86 million units. European exports fluctuated sharply due to trade policies, peaking at 15.41 million units (+17.5% YoY) in July before declining sequentially.
2. **Revenue Growth & Margin Recovery** The tire sector’s 9M 2025 revenue rose 11% YoY to RMB 86.3 billion, though net profit slid 27% to RMB 6.4 billion. Gross margin dipped 4.6 ppts YoY to 18.9%, while net margin fell 3.8 ppts to 7.6%. Q3 gross margin improved 1.1 ppts QoQ to 20%, with net margin up 0.7 ppts to 7.9%.
3. **Domestic Firms Gain Market Share** Overseas leaders like Michelin and Goodyear reported declining sales (-5.5% and -5.4% YoY, respectively) and revenue (-4.4% and -4.1%) in 9M 2025. In contrast, domestic players such as Sailun, Linglong, and General saw sales grow 12%, 10%, and 38% YoY.
4. **Trade Policy Risks & Opportunities** The EU’s anti-dumping probe on Chinese passenger tires in May 2025 escalated with a new anti-subsidy investigation launched on November 6. If high dual-tax rates are imposed, EU-bound orders from overseas Chinese plants could benefit from tight supply and pricing power over the next 2–3 years. Meanwhile, U.S. market competition may ease, aiding industry consolidation.
**Investment Outlook:** Q4 replacement demand may soften seasonally, but OEM and export markets (excluding EU pressure) remain resilient. Lower raw material costs and inventory advantages should sustain profitability. Domestic firms with global footprints—especially those expanding overseas capacity—are poised to capture higher margins amid trade disruptions.
**Risks:** Volatile raw material prices, trade conflicts, freight costs, exchange rates, and intensified competition from overseas Chinese plants.
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