November’s Market Worse Than October’s, Says Michelin Data

The report published by Morgan Stanley Research Europe says it all: “If investors thought tyre data was poor in October, it just got worse…” What this memorable sentence refers to is data released by Michelin on December 18, which shows the supposedly more resilient passenger car tyre replacement market to be down in Europe 10.3 per cent in November, and in North America by a hefty 20.2 per cent. OE sales in the segment dropped a spectacular 33.5 per cent in Europe and 31.2 per cent in North America.

In the truck tyre market, replacement markets sales in Europe (including the CIS) were down 25.7 per cent on November 2007, while in North America they had decreased by 18.7 per cent. In terms of truck tyre OE sales, Europe and CIS sales dropped 36.1 per cent, while those in North America were down 25.0 per cent.

Morgan Stanley believes that, given the volume slowdown, Michelin will struggle to stay above break-even in the forth financial quarter. Tyre companies claim unprecedented price discipline, but according to Morgan Stanley it is unrealistic to expect current tyre prices to hold during an historic collapse of volume and raw materials. It forecasts a ‘peaceful’ 4 per cent decline in pricing in 2009.