Q1 2021: Record High Sales, Demand for Big Tyre Sizes and Rising Cost of Raw Materials

19/04/2021

The beginning of this year was quite difficult not only for our company but also for the whole tyre industry. However, big success doesn't come without big challenges.

In the first quarter, our company managed to achieve good results – 41% more tyres were sold in comparison with the same period last year, and 15% more if compared with 2019.

At the same time, the global trend of growing demand for bigger tyre sizes and a gradual decrease in the number of cars with a rim seat diameter of 13-14 inches has its effect on our sales. So, in January-March 2021, 2.4 times more 17-20 inch tyres were sold than in the same period of 2020.

Premiorri Solazo S Plus tyres are in great demand, in particular in the markets of Europe, the USA and Australia: 61% more of this tyre model was sold than in the same period in 2020.

17-20 inch tyres made up the largest shipments to foreign markets, especially to the USA, Poland, Great Britain, Israel, Romania, Hungary, Armenia, Kazakhstan and Belarus.

Premiorri Solazo tyres were the top seller in the first quarter of 2021: 17% more tyres were sold compared with the last year.

By the way, sales of other models of summer and all-season tyres also increased this year: Itegro +56%, Vimero +170%, Vimero-SUV + 165%, Vimero-Van +160%.

COVID-19 has had a significant impact on the global economy and forced businesses to adjust to new quarantine restrictions.

The decline in global competitiveness due to the pandemic and standstill in anticipation of a potential economic recovery affected the cost of raw materials and other commodities, which caused a rise in prices for manufactured goods, including tyres. Starting in mid-2020 and in the first quarter of 2021, the cost of natural gas, oil, steel and natural rubber has been constantly increasing.

Natural rubber, synthetic rubber, carbon black make up the largest part of the tyre production costs. There is an 8.7% decrease in the production of natural rubber compared to the same period last year, and the total production volume decreased by 6.8% in 2020 compared to the previous year, which led to an increase in prices. As a result, since April-May 2020, prices for natural rubber in world markets have increased by almost 60%.

In addition to the unfavourable situation with raw materials, there were some supply chain disruptions. Since the end of last year, the rates for sea transportation have rapidly increased. A significant number of containers were stuck all over the world due to blockades and congestions in ports, caused by the epidemiological situation and weather conditions (in particular, in the United States).

All these factors led to an inevitable increase in prices for the products of all tyre manufacturers in January-March 2021.

Local factors keep up with the global trends: since October 2020, the price of gas and its transportation for the industry has grown by 32% and 80%, respectively, while the price of electricity - by 23% and distribution - by 22%.

Our company has to react to changes in market conditions accordingly and, as a result, to raise prices of finished products for consumers. So, from January to March 2021, selling prices increased on average by 5% to 10% for various items. And since April 1, they have increased by 5-7% more.


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