Report: Tyre Companies Will Increase Prices in 2010, But Not By Much

Will the leading global tyre manufacturers be able to increase product prices during the course of 2010? Yes, but not by much. That’s the view of Morgan Stanley’s financial analysts who published their assessment in an investor report published yesterday (16 March). Affirming the position, widely held amongst financial analysts, that the tyre industry is historically able to maintain “price discipline,” they commented that: “All major companies have already released price increase announcements – the industry is disciplined.”

However, there was a caveat: “We believe the increase in list price will not automatically translate into higher transaction prices…wholesalers and dealers buy [at] a discount to list price at all times.” Therefore recent increases in list prices do not imply a “tailwind” to pre-tax profits and in fact, the analysts characterised the European pricing environment “especially challenging, given fierce competition from Asian companies (e.g. Hankook)” and depressed truck tyre volumes.

Furthermore, the Morgan Stanley reported stated that the bank believes 2010 will afford an “extraordinary opportunity” to non-premium tyre companies to increase their market share in Europe. Commenting specifically on Pirelli (the subject of the investors report quoted here), the analysts singled out the Italian tyremaker as being in a “slightly more advantageous position given the higher relative weight of less price-competitive regions (Latin America, MEA) and the high skew towards the premium niche.”

Related News:

• Pirelli Raising Prices in Europe

• Hankook Contemplating Price Increase

• Trelleborg Implementing Price Increase

• Vipal to Increase Prices 10%

• Analysts: Tyre Makers to Raise Prices in 2010

• Watts Tyre Group to Raise Prices 6% in 2010