Japan tire sales: April posts 18% YoY growth

by SR on May 17, 2012

Cumulative year-to-date Japan tire sales +15.3% YoY

Japan tire sales xx

  • Conclusion: continue to like tire stocks such as Bridgestone based on strong demand and falling raw material (natural rubber) costs – see chart below.

Thailand natural rubber price in US dollars per kg

(Related tyre stocks: Bridgestone 5108; Sumitomo Rubber 5110; Yokohama Rubber 5101; Toyo Tire 5105; Michelin; Pirelli; Goodyear; Cooper Tire; Hankook; Nexen.)

  • Total cumulative sales +15.3% YoY up to April 2012. The Japan Automobile Tyre Manufacturers Association (JATMA) announced monthly Japan tire sales data for April 2012 a few days ago. April tyre sales came to 9.9m units (-11.1% month-on-month, +18% year-on-year). Total tyre sales in Japan reached 38.4m units for the January to April period of 2012 compared to 33.3m units for the same period in 2011 (see chart above). The driver was OEM (new car) tyre sales, which rose by 54.7% YoY to 17.6m units. That apparent strength in OEM tire shipments is the result of the low base caused by the Tohoku earthquake of March 2011, which disrupted auto production and so in turn hit OEM tyre sales hard. The shaded area in the chart below shows the impact of the quake on 2011 OEM tyre sales (blue line). By comparison, 2012 OEM sales (the red line) in April are moving in normal seasonal fashion, having fallen slightly relative to May.

Japan tire sales OEM (million units)

  • Replacement sales hit by tough comparison with previous year. This year, by contrast, new auto production has soared. Meanwhile, replacement tyre demand has fallen by 5.2% YoY to 20.8m units year-to-date. On the face of it this is a poor figure, but it was caused by a surge in demand during the two months after the Tohoku earthquake, namely April and May 2011. I see two reasons for this. First, there was some concern that tyre output might be affected by damage to tyre production facilities in the region, although for Bridgestone and Sumitomo Rubber those fears turned out to be groundless. So some consumers who were intending to buy tyres at some point may have decided to buy earlier rather risk not being able to get tyres later. Probably more important was an increase in tyre prices scheduled for 1 June 2011 – many consumers probably wanted to buy before the new, higher prices came in. The chart below shows how unseasonally strong April and May were last year.

Japan tire sales replacement (million units)

  • Auto production returning to normal pattern. Auto production in Japan and shipments of OEM tyres for new cars are closely correlated. Simply put, cars don’t ship without tyres, so tyre sales tend to move in line with auto production. Data for Japan auto production in April 2012 will not be disclosed until the end of May, but we can get an early view from tyre sales. As the chart below shows, OEM tire sales fell by 18.3% MoM to 3.93m units. This is only a whisker away from the 18.6% MoM decline that is the median for April over the past decade and in that sense is normal seasonality. The median percentage change in Japan auto production for April (compared to March) was -19% MoM for the decade 1997-2007. So, based on the OEM tyre sales data it looks as if Japan auto production has returned to the normal pattern seasonality after a volatile 14-month period that included the Northern Japan earthquake and the Thailand floods. Having said that, auto production in Japan in March 2012 was 984.5k units, the highest figure since October 2008, so even if April seasonality is “normal” it is “normal” at a high level of output. Which is good for auto OEMs like Toyota but more immediately it is good for auto parts suppliers like Denso and Aisin Seiki. The revenues of auto parts companies are driven by auto production, not auto sales, so they will feel the benefits before the OEMs themselves.

Japan tire sales OEM percent change month-on-month

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