_322 2023 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN 5 FINANCIAL PERFORMANCE Report of the Managers 5.1 REPORT OF THE MANAGERS 5.1.1 Tire markets 5.1.1 a) A global market worth some $190 billion in 2022 The global tire market rose by 5% year-on-year in 2022, to around $190 billion, with light-vehicle tires accounting for approximately 60% of the total and truck tires 30%. By volume, the market represented a little more than 1.5 billion car and light truck tires and some 220 million truck and bus tires. Around three out of four tires were sold in the Replacement market. Longer term, tire demand is likely to expand by 0-2% a year on average in mature markets and by 2-4% a year on average in the new markets. In this environment, Michelin is targeting growing, high value-added market segments, with a focus on premium segments. Changes in tire standards In recent years, mandatory tire performance ratings, displayed on standardized labels, have been introduced in the European Union and many other regions around the world. Similar systems with minimum performance standards and regulated tire labeling have also been deployed in India and are under consideration in China and the United States. Labeling systems now cover the Three Peak Mountain Snowflake (3PMSF) and Ice markings, which show that the tires have demonstrated minimum required snow or ice grip, and will be extended in coming years to the rolling resistance of retreaded tires and to tire abrasion. In addition, environmental legislation requiring car and truck manufacturers to reduce carbon emissions is helping to drive demand for low rolling resistance tires, of which Michelin is a world-leading manufacturer. Such legislation is currently being extended to a broader range of vehicles. For example, the European Union's VECTO carbon emissions simulation model, which introduced tire rolling resistance as a prime parameter in calculating truck emissions, has now been extended to passenger transportation vehicles (buses and coaches), as well as to heavy vans. Following on from the EU introduction in 2019 of wet grip performance standards for worn tires, the United Nations has worked on the R117-04 regulation, with the goal of introducing, effective July 2024, a minimum wet grip performance standard for worn tires still within the legal wear limit. This will help to ensure that tires deliver at least minimum acceptable performance throughout their useful lives. Lastly, embedding RFID tags into every tire means that each one can be electronically identified across its entire life cycle. Moreover, associating data with each of these unique IDs is driving the emergence of new connected services capable of increasing efficiency, enhancing the user experience and supporting more sustainable mobility. In its commitment to connecting tires, Michelin is actively encouraging the widespread take-up of RFID technology. THE GLOBAL TIRE MARKET BY MANUFACTURER IN 2022 Source: 2022 sales in US dollars, published in Tire Business. (1) Tiremakers with a 2-7% market share according to the Tire Business ranking. (2) Tiremakers with less than a 2% market share according to the Tire Business ranking. 5.1.1 b) Tire markets in 2023 In 2023, sell-in demand was more volatile than sell-out, due to the impact of inventory drawdowns in every dealer channel, in both the Passenger car and Light truck and Truck tire markets. By year-end, however, inventories had returned to normal levels and sell-in demand is now expected to move more closely in line with sell-out. 24.9% 14.2% Bridgestone 9.6% Goodyear 36.2% 15.1% Michelin Mid-sized tiremakers(1) Other tiremakers(2)
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