Investing.com -- Goodyear Tire & Rubber Co (NASDAQ:GT) shares climbed 10% in early trading Thursday, outperforming in a market grappling with the implications of President Trump’s reciprocal tariffs. Gains appear to be related to the company’s unique position in the tarrif war and massive new tariffs on tire-importing countries.
In a recent upgrade, analysts from Deutsche Bank provided insights that suggest Goodyear’s unique market position and manufacturing strategy may shield it from the broader industry headwinds caused by these tariffs.
Deutsche Bank’s analysis points to Goodyear’s strong manufacturing presence in the United States, with minimal reliance on production from Mexico and Canada. This domestic advantage is seen as a key factor in the company’s resilience, as the tire industry faces potential inclusion in country-specific tariffs expected to be announced later this week.
The bank’s note also emphasized Goodyear’s focus on replacement tires, which make up a significant 82% of its tire unit sales, as opposed to original equipment (OE) tires. This focus on the higher-margin replacement market could prove beneficial, especially if vehicle owners opt to maintain their current vehicles instead of purchasing new ones due to the increased costs that may result from the tariffs.
Despite the competitive pressure from low-cost imports, particularly from Thailand, Goodyear’s strategic shift towards premium product offerings and reducing lower-end SKUs is anticipated to mitigate long-term impacts. The ongoing modernization of its Oklahoma facility, Goodyear’s largest in North America, further underscores the company’s ability to adjust capacity to meet domestic demand.
Notably, Thailand was hit with a 36% reciprocal tarrif by Trump.
While the Deutsche Bank analysts refrained from predicting a significant increase in volume for Goodyear, they noted that the company’s results should be less impacted due to stability in the replacement market. They calculated that a hypothetical 15% drop in OE tire units for 2025 would require only a 2.25% growth in replacement tire sales to offset the loss, benefiting from the segment’s higher margins.
The analysts concluded, "while tariffs will be a headwind for the entire industry. However, we believe that Goodyear’s manufacturing position, higher exposure to replacement tires, and prior actions to diminish its exposure to low-cost import competition leave it well positioned relative to many suppliers in our coverage."
They added that Goodyear’s strategy under the Goodyear Forward initiative to focus on premium products should result in the company being less affected by low-cost imports in the long run.
The firm has a Buy rating and a $13 price target for Goodyear.