Market situation

Interim Report January–March 2017

The global recovery continues. For 2017 and 2018, growth is expected in all regions of the global economy. The global GDP is estimated to grow by 3.5% in 2017 (3.1% in 2016). The GDP growth estimates for the Nordic countries are from +1.3% to +3.0%, for Europe (including the Nordics) +1.7%, and for the US +2.2%. In Russia, GDP is forecasted to grow by approximately 1–2%.

Raw material costs for tyre production demonstrated fast growth. The global tyre industry is responding to growing raw material costs by price increases. However, actual price increases implemented in the markets are delayed compared to public announcements.

In Europe, the sales of new cars increased in January–March 2017 by 8% year-over-year. Car tyre sell-in to distributors was up 4% year-over-year, with winter tyre demand increasing by 6%. Overall, tyre demand in Central Europe is estimated to grow slightly year-over-year in 2017.

In the Nordic countries, new car sales increased in January–March 2017 by 5% year-over-year. The market volume of car tyres decreased by 7%. For the full year of 2017, car tyre demand is estimated to remain at the same level year-over-year.

In North America, the estimated new car sales were up by 1.0% in Q1/2017 vs. Q1/2016. The market volume of car tyres was up slightly year-over-year. However, demand for winter tyres decreased due to mild winter. For the full year of 2017, car tyre demand is estimated to increase slightly year-over-year.

Russia’s economy started growing again after seven consecutive quarters of recession. The first quarter of 2017 is expected to have been slightly positive and the GDP growth forecasts for the whole year 2017 are in the range of 1–2%. However, private consumption remains quite weak after having declined by 10% in 2015 and by a further 4.5% in 2016. It is expected to continue in a slight decline in Q1/2017 and to stagnate for the rest of the year. This development is reflected in the retail turnover in Russia, which continues to shrink. Sales of new cars in Russia are expected to grow only modestly, in the range of 5–10% vs. 2016. After the first three months of 2017, sales of new cars increased by 1% vs. the same period of 2016, with growth starting only in March (+9% vs. March 2016). The total replacement tyre market sell-in in Russia is expected to grow by 5–10% in 2017 vs. 2016. Summer tyre sell-in for the 2017 season showed strong growth, backed by low carry-over stocks from 2016. The consumer sell-out season in Russia started quite early and strongly, but was later disrupted by changing weather conditions.

The global demand for special heavy tyres continued to vary strongly between products and market areas in January–March 2017. OE forestry tyre demand remained strong. The increased use of wood and the good profitability of pulp manufacturers will also support forestry machine and tyre demand during the following quarters. During the review period, the agricultural segment also showed improvement.

In January–March 2017, the sell-in of premium truck tyres was up by 15% in Europe, and in the Nordic countries demand was up by 21%. In Russia, the demand for premium truck tyres decreased by 5% compared to Q1/2016. Truck tyre demand in 2017 is estimated to increase in all of Nokian Tyres’ western markets; in Russia, demand is estimated to remain at the same level year-over-year.