For those who are getting familiar with us, we apply for jobs sometimes at our interested companies to see what’s going on. This was the case with Goodyear Tire & Rubber Co (we interviewed with Bridgestone). We just couldn’t get their interest but was able to manage an interview with Bridgestone so we can get some intel on where things are heading for tire companies. Why?
With cars getting bigger and EV’s weighing tons, we thought there might be a growing demand for tires.
- For example, the 2023 GMC Hummer EV, a full-size pickup, weighs more than 9,000 pounds, sporting a 2,900-pound battery. In comparison, the 2023 GMC Sierra, also a full-size pickup, weighs less than 6,000 pounds, according to Kelley Blue Book
- The average weight of U.S. vehicles has already increased from about 3,400 pounds to 4,300 pounds over the last 30 years as Americans have ditched passenger cars for pickups and SUVs, according to Evercore ISI analysts.
Based on these stats, it looks promising for tire companies like $GT. Faster wear and tear means more frequent replacements and that means more revenue, right? But it also generated some headlines that because of the weight, the fatality from accidents are a bit more severe. So companies like Benz are trying to make their cars lighter; hence, they might cancel out. Also, after interviewing at Bridgestone, we realized how commoditized tire business is. Cheap players from Korea and China are forcing tire companies to lower margins especially given that there isn’t much differentiation.
However, Bridgestone ($BRDCF) is already investing $5.38 billion in specialty tires so who knows what will happen. One thing we know is that Bridgestone shares are doing much better.
In all honesty, I think it’s a coin-toss. It can go either way for tire companies. So we are taking a very small leap call options of $GT to see if we can turn it into a decent profit.
Do your own DD before making any investment decisions though.