European tyre stocks: Best-to-worst positioned after tariff announcement

Investing.com -- European tyre stocks have come under pressure following the announcement of new tariffs, with analysts at Bernstein ranking the best- and worst-positioned names in the sector based on their exposure to potential fallout.

The European Commission’s move to impose tariffs on certain imported tyres has reshuffled the competitive landscape, impacting manufacturers with greater reliance on overseas supply chains while benefiting those with stronger domestic production bases. 

Bernstein’s analysis suggests that while some companies are better equipped to weather the shift, others face material headwinds.

Among those best positioned is Michelin (EPA:MICP), which maintains a well-diversified supply network and a strong European manufacturing presence. 

The French tyre maker has limited reliance on imports from regions targeted by the new tariffs, insulating it from cost increases. 

Moreover, its premium positioning in the market allows for more pricing power, reducing the likelihood of a significant margin squeeze. 

Bernstein notes that Michelin’s established brand and technological edge further reinforce its ability to navigate the evolving regulatory landscape with minimal disruption.

Continental is also expected to handle the changes relatively well, though with some caution. The German company benefits from a substantial European production footprint, but its exposure to the replacement tyre market and the broader automotive slowdown could temper any immediate gains. 

Bernstein flags that while the tariff structure may offer some buffer against low-cost competition, weaker consumer demand in the region remains a challenge for all players.

At the other end of the spectrum, Nokian Tyres emerges as one of the most vulnerable names in Bernstein’s ranking. 

The Finnish manufacturer has already been navigating significant supply chain disruptions due to the geopolitical situation in Russia, and the tariff changes add another layer of complexity. 

Having lost access to its Russian production facilities, Nokian is in the midst of a restructuring phase, leaving it more exposed to cost pressures and potential supply constraints.

Pirelli, meanwhile, finds itself in a mixed position. The Italian tyre maker has strong brand equity and a presence in the premium segment, but its reliance on imports from affected regions creates some uncertainty. 

While the company has alternative sourcing strategies in place, Bernstein warns that shifting production could introduce inefficiencies and weigh on margins in the short term.

The broader impact of the tariffs remains dependent on the competitive responses of affected players and whether price adjustments are passed on to consumers. 

While European manufacturers with localized production capabilities stand to gain, a sustained downturn in automotive demand could limit the extent of their advantage.