Zhongtai: 26 years of high-end development of the leading tire company breaks through, there is a large potential for substitution overseas.

Zhongtai released a research report stating that 2026 is the first year of high-end supporting facilities, and independent tire companies have started the industrial trend of domestic and overseas high-end supporting facilities (vehicles above 300,000 yuan), opening up growth space and continuously gaining market share from Michelin. The market has high expectations for the tire supply and demand situation, with the bank believing that there is a large substitution space overseas (independent market share of 16% without worries of oversupply for high-end models, while the proportion of middle and low-end vehicles is close to 80%, emphasizing cost-effectiveness when changing tires), and the future independent companies are expected to gradually replace the market share of 3/4th tier foreign companies (about 50%) then replace the market share of 1/2nd tier foreign companies (about 30%), optimistic about the acceleration of overseas substitution starting from 2026 under the resonance of supply and demand (Supply - global dispersal of production capacity outside of Southeast Asia initiated; Demand - cost-effective demand highlighted after changes in trade between 25 Europe and America under inflationary background). Key points of Zhongtai are as follows: Tires: Resilience of total quantity and counter-cyclical nature, 2026 marked as the turning point for accelerated replacement of overseas markets Total quantity and structure: Demand is expected to recover and stabilize at around 1.8 billion tires from 2023 to 2025. From the perspective of structure, replacement for rear tires accounts for over 75%, with important overseas markets in Europe and America accounting for over 50%. Market structure (demand): Global market dominated by first and second tier foreign companies, with independent market share at only 22% in 2025. In overseas markets, independent market share is only 16%, with radial tires accounting for about 30% and bias tires only 15%. The vast potential for independent companies to replace overseas markets, especially in Europe and America, is seen, with a positive outlook for accelerated overseas substitution starting from 2026 under the resonance of supply and demand (Supply - cost-effective products with clearance of tail-end products and contraction of foreign companies; Demand - consumption downgrading in overseas markets). Independent production capacity (supply): Chinese production capacity expected to have slight growth for domestic and non-European and American markets in the future; overseas production capacity targeting Europe and America to bypass trade restrictions, with leading tire companies such as Saixun, Zhongce, Qingdao Sentury Tire, Linglong, and PRINX CHENGSHAN accelerating dispersion of production capacity worldwide outside of Southeast Asia, with a total planned increase in production capacity, expecting European and American market share to rise from the current 19% to 40% (3-5 years later). Bias tires: Consumer goods with strong profitability, independent market share overseas is only 15%, with room for growth Total quantity and structure: Demand is expected to recover and stabilize at around 1.6 billion tires from 2023 to 2025. From the perspective of structure, replacement for rear tires accounts for over 75%, with important overseas markets in Europe and America accounting for over 53%. Market structure (demand): Global market dominated by first and second tier foreign companies, with independent market share at only 19% in 2025. In overseas markets, independent market share is only 15%, with China accounting for 37%, North America 16%, other regions 19%, and Europe 9%. The vast potential for independent companies to replace overseas markets is seen, with a positive outlook for accelerated overseas substitution starting from 2026 under the resonance of supply and demand (with independent products having 1-2 times higher price than products of equivalent levels from second tier foreign companies). Independent production capacity (supply): Leading tire companies such as Saixun, Zhongce, and Qingdao Sentury Tire accelerating the dispersion of overseas production capacity, with a total planned increase in production capacity, expecting European and American market share to rise from the current 17% to 37% (3-5 years later). Radial tires: Production supplies with cost-effectiveness, independent market share overseas at 30%, accelerating growth Total quantity and structure: Demand is expected to recover and stabilize at around 200 million tires from 2023 to 2025. From the perspective of structure, replacement for rear tires accounts for about 80%, with Europe, America, and China combined accounting for over 60%. Market structure (demand): Independent companies have been continuously replacing foreign market share early on, with independent market share rising to 44% in 2025. In overseas markets, independent market share is about 30%, with China accounting for 88%, North America 35%, Europe 30%, and other regions 27%. As radial tires are seen as production materials for businesses emphasizing cost-effectiveness, with changes in trade between Europe and America triggering inflation in 2025, there is a positive outlook for accelerated overseas substitution starting from 2026 under the resonance of supply and demand (foreign products priced at a 50%-200% premium). Independent production capacity (supply): Leading companies such as Saixun, Zhongce, and Linglong accelerating the dispersion of overseas production capacity, with a total planned increase in production capacity, expecting European and American market share to rise from the current 53% to 80% (3-5 years later). Off-road tires: Stably growing market, independent focusing on profit-driven medium and large sizes Total quantity and structure: Global scale of 3.7 million tons, 590 million tires, worth billions of yuan. From the perspective of structure, engineering and agricultural tires account for 93%, with replacement for rear tires accounting for 56% and the Asia-Pacific market accounting for 42%. Market structure (demand): Chinese tire companies have a competitive advantage in the Indonesian and UAE markets, while regions in Europe and America are still dominated by foreign high-end companies such as Michelin and Bridgestone, with independent companies focusing on the acceleration of medium and large sizes. Independent production capacity (supply): Leading companies such as Saixun, Hai'an, and Linglong accelerating the dispersion of overseas production capacity, with expectations for continuous production from 2026 to 2028. Large tires: High technological barriers and profitability, independent companies breaking foreign monopolies gradually Total quantity and market structure: Global scale of 360,000 tires, worth 38.5 billion yuan. Large tires are monopolized by three foreign companies, but independent companies have been making technological breakthroughs in recent years, and are expected to continuously gain market share with an advantage in cost-effectiveness and rapid response. Independent production capacity (supply): Leading companies such as Hai'an, Saixun, and Fengshen accelerating the dispersion of production capacity for large tires, and are expected to speed up production from 2026 to 2028. Risk factors: Fluctuations in prices of raw materials such as rubber and carbon black; construction progress of new production capacity falling short of expectations; downstream tire application demand falling short of expectations; uncertainty in international trade frictions; brand building falling short of expectations; risks of third-party data distortion and calculation deviations.