Michelin released its financial results for the first half of 2025 on July 24, which offers a clearer picture of how global market conditions are affecting the tire industry, as well as what’s shaping tire market trends in 2025, particularly for the replacement channel.
While the company faced a sharp drop in original equipment (OE) demand and rising competitive pressure from budget tire imports, Michelin leaned into its value-driven strategy, premium product mix, and localized supply chain to maintain margin strength. But the report also points to growing headwinds for tire dealers: replacement volumes propped up by low-cost imports, eroding price discipline in commodity segments, and increasing pressure to differentiate with premium offerings.
OE Pullback Dominates Market Landscape
Tire volumes were down 6.1% year-over-year, with OE accounting for 85% of that decline. The most significant volume losses came from truck and agricultural OE segments, driven by economic uncertainty, soft equipment demand, and cautious fleet ordering patterns.
For tire dealers, this is important because a slowdown in OE can delay the replacement cycle, especially in heavy-duty and agricultural applications. Dealers serving these sectors may need to adjust inventory planning and be conservative in forecasting demand into early 2026.
Replacement Tire Markets Remain Resilient
While OE struggled, replacement sell-in markets held up relatively well, particularly in the passenger and light truck (PC/LT) segment. However, this apparent resilience came with a sharp rise in imported budget tires, especially in Europe and North America, which is reshaping the dynamics of the replacement tire market.
According to Michelin’s analysis of the broader industry, the North American PC/LT replacement market grew by 2% in H1 2025, while OE tire demand declined by 4.6%. In Europe, the trend was similar: replacement market volumes increased by 1%, while OE volumes dropped by 7.3%. These figures represent overall market performance, not Michelin’s internal results.
However, that growth was largely driven by an influx of low-cost imported tires, especially from Asia. Michelin notes that these imports have fueled volume growth but weakened price discipline across commodity segments. In the U.S. market, this is especially evident in common 16- and 17-inch PC/LT sizes, where value-tier products now occupy significant shelf space. The same pattern is visible in the truck segment, where North America’s replacement truck tire market grew by 2%, even as OE sales fell 19% year-over-year. Again, the report attributes this growth in large part to imported product flooding the market, particularly in entry-level tiers.
Michelin cautions that these budget imports are fueling volume growth in replacement markets, particularly in Europe and North America. While the company does not name specific sizes or SKUs, it warns that price discipline is weakening across commodity segments, putting pressure on margins. For tire dealers, this trend is especially concerning in lower-cost passenger and light truck categories, where imported brands are increasingly prominent across both regional and national retail channels.
As more consumers are drawn to the lower sticker price of imports, dealers relying on value-tier or mid-range product lines could feel the squeeze. These pressures are unlikely to ease in H2, particularly as economic conditions drive price-sensitive buying behavior.
Michelin’s response (emphasized throughout the report) is to stay disciplined on price and focus on value-accretive segments, such as 18-inch and larger sizes, EV-compatible tires, and high-performance SKUs, which are showing growth and delivering healthier margins. This approach was reflected in its strong 4.0% price-mix gain and continued investment in high-performance and EV-compatible products.
Price-Mix Offsets Volume Drop as a result of Tire Market Trends in 2025
Michelin reported a 4.0% increase in price-mix. Premium product launches, including the MICHELIN X LINE GRIP D and MICHELIN CrossClimate 3, drove this uptick, delivering outstanding performance in grip, rolling resistance, and mileage. Segment operating income reached €1.45 billion (approximately $1.7 billion), with an 11.3% margin at constant FX.
For tire dealers, this shows that profitability still exists in Tier 1. This is especially true when paired with clear product benefits that resonate with discerning consumers.
Strong Cash Flow and Financial Resilience
Michelin generated €1.03 billion (approximately $1.2 billion) in free cash flow before M&A, while reducing its gearing ratio from 22.2% to 16.7% in the first half of the year. That financial strength has tangible dealer-level benefits. It enables Michelin to continue investing in product development, supply chain optimization, and customer support, even as other brands retrench.
Micheline’s Tire Market Trends in 2025: Local-to-Local Strategy and Inventory Realignment
Michelin is evolving its operations through a “local-to-local” manufacturing strategy, aimed at producing closer to demand. At the same time, the company is taking steps to reduce inventory levels while improving customer service.
For dealers, this may signal a dual opportunity and risk. On one hand, faster local fulfillment may reduce lead times and improve availability of key SKUs. Leaner inventories at Michelin may require dealers to forecast and communicate demand more precisely to ensure consistent access to product.
Dealer Networks and Franchising Expansion
Michelin is accelerating its franchise network model, which now accounts for around 65% of its retail footprint. Michelin says it remains committed to supporting independent dealers. However, the expansion of franchised locations signals a broader strategy to strengthen its direct connection with end-users.
EV-Ready Tires
The company says every Michelin-branded passenger and light truck tire is now engineered to be EV-ready. This means the tires are built to support the unique demands of electric vehicles. The brand says it is leveraging these technologies to deliver low rolling resistance, quiet ride quality, and longer tread life.
Connected Solutions and Fleet Services
Michelin’s investment in Connected Fleet Services and Tire-as-a-Service is ramping up. This offers predictive maintenance, automated inspections via Quickscan, and tire data integration into fleet management systems.
For tire dealers serving fleets, this is an opportunity to deliver more value-add and lock in long-term service contracts. Michelin says its digital tools can help dealers monitor tread wear, schedule service proactively, and reduce customer downtime.
What Tire Market Trends to Expect in H2 2025
In its first-half report, Michelin says it expects OE demand to remain subdued through the second half of 2025. This is particularly true in North America and Europe. However, replacement channels are expected to experience moderate global growth, with mining, aircraft, two-wheel, and premium segments leading the way.
Dealers should be ready for:
- Continued price pressure from budget imports;
- A growing consumer focus on premium and EV-compatible SKUs;
- Potential shifts in product availability as Michelin adapts inventory and manufacturing;
- New opportunities in fleet services and connected solutions.
