Argentina’s tire market is experiencing a dramatic shift as free trade policies reshape the industry landscape. the move is creating a new dynamic for both local manufacturers and consumers. following a challenging 2024, December and January saw a notable recovery in the tire replacement market, fueled by adjusted prices and the resurgence of credit options. However,this recovery presents a complex situation for established Argentine tire factories,which are now navigating increased competition and evolving market conditions.

the evolving market dynamics are drawing comparisons to the automotive industry, where a previously dominant national production share of 70% has rapidly shifted towards a 30% import ratio. This potential trajectory for the tire sector is raising concerns and creating opportunities for stakeholders across the industry.

Manufacturers vs. Consumers: A Balancing Act

The Argentine tire market presents a delicate balancing act between manufacturers, who have invested heavily in their facilities and workforce, and consumers, who until recently, faced exorbitant prices. The interplay between these two groups is now heavily influenced by the government’s deregulation efforts,aimed at fostering a more competitive market.

The months of December and January brought positive sales volumes to “gomerías,” or tire shops, as the market responded to price adjustments and the availability of credit with low interest rates. This allowed more people to afford the notable expense of replacing all four tires on their vehicles, boosting sales and providing a much-needed lift to the sector.

Challenges for Local Factories

Despite the overall market recovery, the three Argentine tire factories—Fate, Bridgestone, and Pirelli—are not experiencing the same level of resurgence. These companies are grappling with preventive crisis plans (PPC), which have led to staff reductions and production halts. They also face ongoing conflicts with the Unique Union of Argentine Tire Workers (Sutna),adding another layer of complexity to their operational challenges.

Adding to their challenges, these factories hold significant tire inventories, with some exceeding one million units. Sales and exports are declining due to increased international competition and a devalued currency, making exports to Brazil less competitive. This combination of factors is putting significant pressure on local manufacturers to adapt and innovate to survive.

Tax Deregulation: A Two-Pronged Approach

In the last quarter of the previous year, the government implemented a tax deregulation program aimed at creating a new landscape for the tire sector, promising reasonable prices and a wider range of options for consumers. This program consists of two key measures designed to reshape the market dynamics.

the first measure involved eliminating “reference prices,” a mechanism that established a minimum price for imported tires. This was intended to protect the national industry from what some considered anti-dumping measures, preventing the influx of aggressively priced Asian tires that local and regional industries could not compete with. The removal of these reference prices has opened the door for increased competition from international manufacturers.

Though, these reference prices only applied to tires from outside the Mercosur zone, representing only 30% of the total market. The remaining tires are produced nationally or within Mercosur countries like Brazil, where companies such as Goodyear, Michelin, Continental, sumitomo, and Dunlop operate. These tires, like cars, fall under the economic complementation agreement (ACE14), allowing for 0% tariffs on both exports to and imports from Argentina, further intensifying competition within the region.

Tariff Reductions: A Gradual Transition

The second phase of deregulation involves gradually reducing the import tariff on tires from countries outside the region from 35% to 16%. The government is implementing this change progressively to mitigate the impact on companies with local factories, allowing them time to adjust to the new competitive landscape.

The tariff initially decreased from 35% to 30% on January 1. It was further reduced to 25% on May 1.The next reduction, to 20%, is scheduled for May 1, with the final reduction to 16% set for September 1 of 2025. This phased approach is intended to provide a smoother transition for local manufacturers, but it also requires them to act quickly to improve their competitiveness.

Industry Perspectives

An entrepreneur in the tire sector noted the complexities of the situation,stating:

The industry,as such,is complex,but it is not the same that happens in the market. it is true that January was a month with very good sales of tires for cars and pick-ups, but it is also true that there was a Imported Rubber Revenue Avalanche by four or five companies that handle the largest volume of tires in the country and They regulate prices of the market. Manufacturers do not regulate price,they can only lower the wholesale price as they can do it. Some have Stock of imported inputs for six months which were imported with the total country tax. Lowering cost will take longer.Simultaneously occurring those importers tripled their volumes in the last two months,generating a very large price,For example,in the bribes of smaller shot.

This outlook highlights the influx of imported tires and their impact on market prices,contrasting the situation faced by manufacturers with existing inventory and tax obligations. It underscores the challenges faced by local producers in competing with importers who have greater adaptability in pricing and inventory management.

Market Segments: Replacement, Original Equipment, and Heavy Transport

The tire buisness for national brands can be divided into three key areas: the replacement market (tires sold to individuals), the original equipment market (tires sold to automotive manufacturers for new vehicles), and the heavy transport tire market. Each segment presents unique challenges and opportunities for manufacturers and distributors.

according to industry specialists, the heavy transport tire market is notably significant. As one expert explained, “Sell 60,000 Trucks truck equivalent in economic movement to sell 600,000 car tires.” This highlights the importance of the heavy transport segment to the overall health of the tire industry in Argentina.

Truck Tires: A Highly Competitive Landscape

Truck tires, typically the most expensive, are now facing increased competition. “The gums of $ 600,000 no longer exist,” said the same businessman, referring to the price drops in the market. “First they went down to 500,000,then to 450,000 and if they do not go down anymore they will not sell them,because the roof to which

Argentina’s Tire Market Revolution: A Free Trade Crossroads

Argentina’s tire market stands at a crossroads,with free trade policies driving significant changes and creating both challenges and opportunities for manufacturers,distributors,and consumers. the industry must adapt to the new competitive landscape to ensure long-term viability and success.