_330 2023 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN 5 FINANCIAL PERFORMANCE Report of the Managers 5.1.2 b) Automotive and related distribution – Analysis of sales Sales in the Automotive and related distribution segment rose by 1.4% year-on-year to €14,339 million in 2023. Volumes sold declined by 1.9% over the period, reflecting an increase in Original Equipment sales and a contraction in Replacement sales, which were impacted by extensive dealer inventory drawdowns through to the final quarter. In the midst of this steady return to standard stock levels, spurred by higher interest rates, the Group focused on the most value‑accretive market segments, by continuing to broaden its product portfolio and growing its sales of premium 18-inch and larger tires. As a result, the reporting segment enjoyed a very positive mix over the year, with the product and geographic mixes amply offsetting the unfavorable OE/Replacement mix. Sales were positively impacted by the price increases introduced in 2022 and early 2023 to offset sharply rising costs. Original Equipment volumes sold rose over the period, lifted by the return to normal conditions in automotive supply chains, particularly for semiconductors. This helped to drive gains in every operating region except China, where the reduction in government incentives weighed on local demand. In addition, sales continued to be lifted by growth in the electric vehicle segment. Backed by its technological leadership, the Group is targeting the premium segments of the EV market, and continues to enjoy significantly higher market share in electric vehicle tires than in internal combustion vehicle tires. In the Replacement segment, sales volumes declined year-onyear, at a time of economic uncertainty and extensive dealer inventory drawdowns. The geographic mix had a positive impact, reflecting more favorable dynamics in the most profitable regions, with sales holding firm in North America, growing in China and declining in Europe. The percentage of 18-inch and larger tires in the sales mix continued to rise sharply over the period, led by a fast growing market in which the Group maintained its positions. The sustained success of the MICHELIN Cross Climate 2 attests to the Group’s leadership in the all-season segment. The Group continued to roll out its distribution strategy by (i) expanding its presence in online channels, as seen in the development of Allopneus in France and BlackCircles in the UK; (ii) pursuing franchising programs in several countries (Canada, Egypt and South Africa); and (iii) acquiring, in late 2023, online tire retailer Tyroola in Australia and New Zealand. In Europe, sales declined as dealers steadily drew down inventory all year long, with Southern Europe (France, Spain and Italy) proving more resilient than the other operating regions. Thanks to a significant improvement in its customer service performance, the Group gained market share in the 18-inch and larger segment in the second half. In the intermediate or “Tier 2” segment, Kléber brand sales enjoyed robust growth and continued to move upmarket. Sales volumes held firm in North America, reflecting resilient demand and kilometers traveled, particularly in the second half when MICHELIN-branded sales rose year-on-year despite inventory drawdowns that continued through to year-end. In South America, where fast-growing demand is being driven by imports, the Group further enhanced its mix and gained new market share in the 18-inch and larger segment, particularly in Brazil. Group sales in China rose from favorable prior-year comparatives, which were impacted by the lockdowns that dampened demand in spring and autumn 2022. The Group continued to support the market’s move up the value chain, stabilizing its overall share and increasing its penetration of the 18-inch and larger segment. In a Southeast Asian market that was down year-on-year, largely due to reduced demand in Japan and Australia, the Group increased its share and enjoyed a favorable mix, reflecting the stronger market share gains in the 18-inch and larger tire segment. In the highly competitive Africa/India/Middle East markets, Group sales were impacted by extensive inventory drawdowns, but sell-out market share rose in the 18-inch and larger segment in the most profitable countries (the United Arab Emirates, South Africa and Egypt). In India, the sales are very strongly held back by drastic restrictions in imports, the volumes sold by the Group in the country have dropped 90% over the last three years. Michelin Lifestyle (formerly Michelin Experiences) reported robust sales growth for the year, primarily in the fine dining, hospitality and travel markets. Michelin Lifestyle remains an unrivaled vehicle for promoting the MICHELIN brand and its premium positioning.
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