Strong Performance in the Third Quarter
Hankook Tire & Technology achieved an “earnings surprise” during the third quarter of this year, which has sparked interest in how the domestic tire industry managed to thrive despite high U.S. tariffs. While other automakers and auto parts companies experienced significant profit declines due to tariff shocks, the tire industry delivered unexpected results. This raises the question: what is behind this divergence?
The three major domestic tire companies all exceeded market expectations in the third quarter. Hankook Tire & Technology reported that its tire division’s third-quarter revenue (2.707 trillion Korean won) increased 11.2% year-on-year, with operating profit (519.2 billion Korean won) rising 10.4% over the same period. Both revenue and operating profit marked record highs for a single quarter. Kumho Tire saw third-quarter revenue (1.1137 trillion Korean won) fall 0.1% year-on-year, with operating profit (108.5 billion Korean won) declining 22.6%. The results reflected the impact of a fire at its Gwangju factory in May but still surpassed securities industry forecasts (revenue: 1.1097 trillion Korean won, operating profit: 91.4 billion Korean won). Nexen Tire also saw operating profit (46.5 billion Korean won) decrease 11%, but it exceeded market expectations (42.6 billion Korean won).
Lower U.S. Dependence, Focus on Europe
The tire industry’s relatively low dependence on the U.S. market is cited as a key factor in its strong third-quarter performance. Hyundai Motor and Kia, where North America accounts for over 40% of sales, are among the domestic automakers and parts companies most affected by the U.S. government’s 25% tariffs on completed vehicles and parts imposed in April and May.
In contrast, the tire industry managed to mitigate the impact of U.S. tariffs by strengthening its focus on Europe, its largest market. As of last year, North America accounted for 21% of Hankook Tire & Technology’s tire sales, less than half of Europe’s 42%. Its European share rose 7 percentage points from 35% in 2019, while its North American share fell 3 percentage points over the same period. Kumho Tire and Nexen Tire reported North American sales ratios of 30.6% and 24%, respectively, as of last year.
“The European automotive market has recently rebounded significantly, driven by mass-market electric vehicles,” said a source from the industry. “The tire industry has simultaneously benefited from increased sales in Europe and reduced tariff impacts.”
The industry also raised tire prices for the U.S. market by 7–10% starting in July to offset tariff-related costs. “Replacement tires are purchased every 3–5 years, and consumers tend to stick with familiar brands, making them less sensitive to price hikes,” said Lim Eun-young, a Samsung Securities researcher. “About 50% of replacement tires are the same brand as the original equipment.”
Higher Sales of Premium Tires Boost Profitability
The growing share of electric vehicle (EV) tires has fundamentally improved the tire industry’s profitability. In the third quarter, EV tires accounted for 27% of Hankook Tire & Technology’s passenger car and light truck original equipment tire revenue, up 7 percentage points year-on-year. Kumho Tire’s EV tire share rose from 9.8% in 2023 to 16.3% last year and reached 22% in the third quarter.
EV tires are about 30% more expensive than internal combustion engine (ICE) tires, making them a key focus for the industry. EVs require higher technical standards due to heavier batteries and faster acceleration, which increase wear on tires. The sustained popularity of SUVs and large vehicles, driving demand for larger tires, has also boosted profitability.
Positive Outlook and Stock Performance
Shares of the three tire companies have surged recently. “The third-quarter results were strong, and there are additional positive factors like falling rubber prices and potential U.S. tariff reductions,” said a source from the industry. On the 10th, Hankook Tire & Technology’s stock price jumped over 18% from the previous close and nearly 50% compared to a month ago. Kumho Tire (18.55%) and Nexen Tire (27.58%) also saw significant stock price increases over the past month.