CLERMONT-FERRAND, France — Michelin Group has revised upward its 2020 financial guidance on the back of new market forecasts and the cost reductions linked to the COVID-19 pandemic.
In a "still highly uncertain environment" and in view of the recent change in tire demand, Michelin raised its segment operating income forecast by 33% to nearly $1.9 billion at constant exchange rates, barring any new systemic effect from COVID-19.
The French tire maker said it expects passenger car and light truck tire markets to decline by 13% to 15% over the year, which compares with its earlier forecast of a 15% to 20% decline announced in Michelin's first half report.
Michelin said it expects "further improvement" in demand for original equipment (OE) tires, led by the recovery in China, government incentives in Europe and inventory rebuilding in North America.
The passenger car replacement segment is anticipated to show a "sustained post-lockdown upturn in demand," occurring at varying speeds depending on the region.
Truck tire markets are anticipated to fall 12% to 14% with a "steep fall-off in demand" projected in every region except China, where the market is rebounding strongly. Michelin had previously estimated a fall of 13% to 17% in demand for the full year.
Replacement segment is expected to come in close to 2019 levels in Europe and North America, up slightly year-on-year in China, and "still sharply down" in other regions.
In the specialty tire markets —covering mining, two-wheeler, farm and aircraft tires — Michelin expects demand to fall by 15% to 19%, higher than the previous estimates of 13% to 17%.
Mining tires are anticipated to see a slowdown in demand as the COVID recession is felt after a time lag of several months.
Off-the-road demand will be relatively resilient in agricultural replacement tires, but down sharply in agricultural OE and infrastructure tires, according to Michelin.
Two-wheeler tires are expected to see a rise in demand, as the market is lifted by its image of "a safe form of transportation" amid the COVID crisis.
As for aircraft tires, Michelin expects a "collapse in demand."