01 Growth in the global automotive tire markets was mixed in 2024. Could you describe the main trends for us? The new vehicle market, which is naturally cyclical, contracted sharply due to three main factors: (i) the decision by many automakers to postpone the launch of fully electric vehicles in an uncertain regulatory environment; (ii) pressures on purchasing power, which impacted sales of not only of EVs but also ICE vehicles, whose prices had risen sharply in 2022-2023, and (iii), generally depressed Chinese domestic demand. In the Replacement market, demand tracked the return of kilometers traveled to pre-Covid levels, except in China. Tire sizes are still increasing very quickly, with the 18-inch and larger segment growing by almost 10% a year. This is a structural trend that is likely to continue, led by the gradual takeup of EVs, which require larger tires to carry a heavier load with a different center of gravity. Even as tires for recent vehicles continue to premiumize, at the other end of the market, we’re seeing an increase in low-price imports from Asia, intended for older vehicles. Gary Guthrie, Executive Vice President, Automotive Global Brands Business Line What impact will these trends have on Michelin’s strategy? Michelin has relatively little cyclical exposure to the Original Equipment market, which accounts for only 20% of automotive segment sales and less than 10% of the consolidated total. We take a selective approach to OEMs, working with the ones who leverage the full value of our technological leadership to deliver safer, more sustainable mobility. That’s why we start engineering a tire far upstream, early in the vehicle design phase, so that it can meet the performance, cost and energy efficiency specifications more effectively and thereby help our OEM customers to reduce the car’s life cycle carbon footprint. In the Replacement market, we’re expanding quickly in the premium segment, with sales of 18-inch and larger models now accounting for almost 55% of MICHELIN brand sales. Because these tires are generally fitted on newer, more upscale cars, this is also the segment where the performance of MICHELIN tires is most appreciated and valued by motorists. To respond to this strong growth in the most value-accretive segments and to make our tires as closely as possible to customers, the Group is constantly realigning its production base. What are Michelin’s competitive advantages that make you confident that this strategy will succeed? Our technological leadership enables us to meet the highest standards of safety, durability, grip and fuel efficiency, without ever compromising performance. A recent study by German Automobile Association ADAC showed that MICHELIN tires offer almost 30% better abrasion performance than the average of our premium competitors, which helps to ensure longer tread-life and better environmental performance. Our pioneering spirit and unrivaled materials expertise mean that already more than two decades ago, we designed a tire capable of meeting the exacting specifications for use on EVs, which are heavier than ICE cars, have a different center of gravity and deliver higher motor torque. That’s why, unlike our competitors, we haven’t had to invest in dedicated processes or facilities, or develop a specific range of EV tires. Every MICHELIN tire is EV-compatible, which greatly reduces our sensitivity to the pace of EV takeup. This leadership is also helping to support Replacement sales, since a motorist who buys a new MICHELIN-fitted car and appreciates its tire performance will be more inclined to buy MICHELIN tires as replacements. As a result, our tires have more online 5-star consumer ratings than our competitors and more awards from recognized institutes like JD Power. Lastly, we have an extensive presence in physical and online retailing, giving us unparalleled market access and in-depth knowledge of the customer journey. With 6,000 franchisees in Europe and Asia, and our TBC joint venture in the United States, we are the world’s largest franchiser in the automotive industry. At the same time, our e-tailing operations via recently acquired companies gives us unique insight into the customer journey and online purchasing behavior. Winning the product mix battle: technological leadership and unrivaled market access Automotive The tire business Turning challenges into success The tire business 36 2024 UNIVERSAL REGISTRATION DOCUMENT_MICHELIN
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