February 03, 2026
Pricing and its impacts on competitiveness: a study of the tire industry
Fabio Gomes de Souza; Helio Masaru Fujihara
Summary prepared by the ResumeAI tool, an artificial intelligence solution developed by the Pecege Institute focused on synthesis and writing.
This study analyzed the critical factors in the pricing of Alpha Pneus, a motorcycle tire manufacturer, to propose a more competitive model. The research sought to answer which pricing model is most suitable for the Brazilian scenario, considering economic, tax, and market variables. To this end, the work identified the components of the selling price, evaluated the impacts of the current policy on regional competitiveness, and proposed a model based on net price with regional adjustments.
The tire industry in Brazil, composed of 11 manufacturers in 21 plants, employs 32,000 people. The sector faces pressure from imports, which in 2024 reached 54 million units, close to the national production of 62 million. The imbalance is aggravated by price disparity, with imported tires, especially Asian ones, arriving with costs up to 31% lower than the international average (Tecnologística, 2025). The “Custo Brasil” (Brazil Cost), with high tax burden and logistical complexity, makes pricing a strategic decision, reflecting competitive positioning and consumer perceived value (Kotler & Keller, 2012).
Pricing is a strategic tool, especially in Brazil; regional tax complexity imposes challenges. Variations in ICMS rates and tax substitution regimes create distortions in final prices, affecting competitiveness. Exchange rate instability and variations in purchasing power also influence pricing dynamics in emerging markets (Carrasco & Brunstein, 2022). In the tire industry, complexity is amplified by the dependence on imported inputs and a tax burden that can exceed 40% of the product’s value (Impostômetro, 2025), requiring flexible strategies.
Studies indicate that regionalized pricing strategies are more effective in diversified economic environments, improving commercial performance (Gomes et al., 2021). The consumer’s purchasing decision involves price, safety, brand reputation, and convenience, showing that perceived value is multifaceted (Revista Soberana, 2025). A pricing policy that ignores regional particularities loses competitiveness in price-sensitive markets or fails to capture value where demand is more inelastic.
Alpha Pneus, a family business with 80 years of operation and a 20% market share in the motorcycle tire segment, uses a standardized pricing model that is inadequate for the national reality. The methodology, based on an average tax factor and a uniform profit margin, generates distortions that compromise competitiveness, especially in the North and Northeast regions. This simplified approach fails to consider the price sensitivity and lower purchasing power of these regions, limiting the company’s expansion.
The research is applied, quantitative, and descriptive, using the case study method (Yin, 2015). The first stage was a literature review on pricing models, tax structure, and competitiveness, based on authors such as Porter (1980) and Nagle, Hogan, and Zale (2011).
The second stage involved collecting primary data from the company (direct costs, indirect costs, expenses, sales). Based on this data, two pricing models were analyzed: the current one, with a fixed tax factor and uniform margin, and the proposed one, based on net price adjusted by region, which isolates tax distortions to evaluate real profitability (Bruni & Famá, 2022; Martins, 2010).
The third stage was a market survey to contextualize Alpha Pneus’ prices against the competition, with e-commerce data. The price elasticity of demand was calculated using the midpoint method (Varian, 2015) to classify demand as elastic or inelastic (Samuelson & Nordhaus, 2012), as market pricing must consider costs, competition, and consumer sensitivity (Nagle, Hogan & Zale, 2016).
The study’s limitations relate to the confidentiality of the company’s detailed financial data. Furthermore, as it is a case study, the generalization of results to other industries should be cautious. Despite this, the analysis generated valuable insights and a proposal for an applicable model, contributing to managerial decision-making. The analysis of ICMS-ST was crucial, as its anticipation mechanism is a primary source of price disparity between states (Silva, 2023).
The analysis of Alpha Pneus’ current model revealed distortions that compromise its competitiveness. The company uses a fixed tax factor of 21%, calculated as a weighted average of ICMS, PIS, and COFINS, and applies a uniform accounting margin of 10%. This methodology ignores interstate tax particularities, resulting in a final price that can be up to 13.52% higher in Bahia compared to São Paulo for the same product, mainly due to the calculation of ICMS-ST.
This disparity makes expansion into regions outside the Southeast unfeasible. As a result, the company concentrates 62% of its sales in the Southeast, while the Northeast, with 28% of the national motorcycle fleet, represents only 17% of Alpha’s revenue. The factory’s location in Guarulhos (SP) partially justifies this concentration, but reveals a large unexplored market opportunity.
The current model also distorts internal profitability: the real accounting margin is only 4.45% on sales to São Paulo, while it rises to 15.76% in Bahia. This shows that the company subsidizes its operation in São Paulo with excessive margins from other regions, an unsustainable strategy that does not achieve the 10% target in a balanced way, a margin that should guarantee economic viability and risk coverage (Assaf Neto, 2021).
Alternatively, the study proposed a model based on net price (value before recoverable taxes), an approach that allows a clear view of revenue and eliminates distortions (Bruni & Famá, 2022; Crepaldi, 2004). In the proposed model, a 10% accounting profit margin is applied to total costs and expenses. From there, specific taxes for each operation are added: PIS (1.65%), COFINS (7.65%), IPI (15%), ICMS according to the destination state (18% for SP and 7% for Bahia), and ICMS-ST.
The simulation with the proposed model reduced the final price difference between São Paulo and Bahia from 13.52% to 0.09%. For the 140/70-17 tire, the price in Bahia dropped from R$ 290.99 to R$ 272.38 (a reduction of 6.39%), and the real accounting margin stabilized at 10% for both regions, aligning pricing with profitability objectives. The approach allows for nationally competitive prices without sacrificing profitability, reinforcing that net price is more strategic in markets with distinct tax regimes (Martins, 2010).
Online market research revealed inconsistent pricing by Alpha Pneus. For the 90/90-18 model, the price is 19.01% above a competitor, while for the 140/70-17, it is 39.16% below others. This volatility indicates a lack of value- and competition-based strategy, shifting bargaining power to customers. The analysis also identified that none of the analyzed competitors market all four of Alpha’s best-selling models, creating an opportunity for the company to position itself as a complete supplier.
Based on this data, a regional readjustment simulation was performed, considering the price elasticity of demand. In the Northeast, with elastic demand (-3.13), a 6.39% price reduction projected a 20% increase in quantity sold, a typical behavior in markets with higher price sensitivity (Rodrigues & Almeida, 2021). In the Southeast, with inelastic demand (-0.81), a positive adjustment of 6.16% resulted in a projected retraction of only 5% in sales, consistent with higher-income markets (Souza & Martins, 2020). This segmentation allows for revenue maximization by adapting prices to local demand characteristics (Kotler et al., 2022).
The combined financial impact of this strategy was positive. Maintaining total sales volume at 355,000 units, monthly sales revenue increased by 0.97%, from R$ 36.9 million to R$ 37.2 million. Gross profit grew by 3.13%, and earnings before interest and taxes (EBIT) increased by 7.86%, an additional gain of R$ 357,448 per month. Net operating profit after tax (NOPAT) also grew by 7.86%, resulting in an additional net gain of R$ 235,916. The results prove the viability of a segmented approach, which balances market gains in elastic regions with margin optimization in inelastic regions.
The study demonstrated that Alpha Pneus’ pricing model, based on an average tax factor, compromises its competitiveness, resulting in prices up to 13.52% higher in the North and Northeast regions. This distortion limits growth and concentrates sales in the Southeast, reducing the company’s bargaining power with large clients. The analysis validated the need to adopt a net price-based, regionally adjusted model that considers the tax burden of each operation. This approach eliminates profitability distortions and provides the necessary flexibility to compete in the heterogeneous national scenario. The implementation of the new model would make Alpha Pneus’ products more competitive throughout Brazil and optimize overall profitability, strengthening the company’s sustainability. It is concluded that the objective was achieved: it was demonstrated that adopting a net price-based, regionally adjusted pricing model is more effective for maximizing the company’s competitiveness and profitability, correcting the tax distortions generated by the current method.
References:
ASSAF NETO, Alexandre. Corporate finance and value. 8th ed. São Paulo: Atlas, 2021.
AUTOINDÚSTRIA. Tire industry registers drop in the quarter and fears increase in imports. 2025. Available at: https://autoindustria. com. br/. Accessed on: Aug 26, 2025.
BRUNI, Adriano Leal; FAMÁ, Rubens. Strategic cost management and pricing. 6th ed. São Paulo: Atlas, 2022.
CHAMBER OF DEPUTIES. Tire industry complains about competition from foreign companies; government analyzes increasing import tax. 2025. Available at: https://www. camara. leg. br/noticias/. Accessed on: Aug 26, 2025.
CARRASCO, P. R.; BRUNSTEIN, J. S. Pricing in emerging markets. Brazilian Journal of Business Management, v. 24, n. 3, p. 75–92, 2022.
CREPALDI, Silvio Aparecido. Cost accounting. 3rd ed. São Paulo: Atlas, 2004.
DENATRAN (National Traffic Department). Vehicle Fleet Statistics. Brasília, DF: Ministry of Cities, 2025.
E-SIMPLES AUDITORIA. Taxation of tires in Simples Nacional: the impact of taxes on the sector. 2025. Available at: https://esimplesauditoria. com. br/. Accessed on: Aug 26, 2025.
EV8 AUTO. Trends for the tire market in Brazil in 2025. 2025. Available at: https://ev8auto. com. br/. Accessed on: Aug 26, 2025.
GOMES, L. A. V. et al. Regionalized pricing strategies: a study in Brazilian industrial companies. Management and Planning Journal, v. 22, n. 2, p. 115–134, 2021.
IMPOSTÔMETRO. Tax burden on tires may exceed 40% of the final price. 2025. Available at: https://impostometro. com. br/. Accessed on: Aug 26, 2025.
JORNAL DE BRASÍLIA. Study points to artificial price increases by tire multinationals in Brazil. Jornal de Brasília, Mar 10, 2025. Available at: https://www. jornaldebrasilia. com. br/. Accessed on: Aug 26, 2025.
KOTLER, Philip; KELLER, Kevin Lane. Marketing management. 14th ed. São Paulo: Pearson, 2012.
KOTLER, Philip; KELLER, Kevin Lane; CHERNEV, Alexander. Marketing management. 16th ed. São Paulo: Pearson, 2022.
LOGCOMEX. Tire exports grow 19% while the domestic market shrinks in the first quarter. 2025. Available at: https://logcomex. com/. Accessed on: Aug 26, 2025.
MARTINS, Eliseu. Cost accounting. 10th ed. São Paulo: Atlas, 2010.
NAGLE, Thomas T.; HOGAN, John; ZALE, Joseph. The strategy and tactics of pricing: a guide to growing more profitably. 5th ed. New Jersey: Pearson, 2011.
NAGLE, Thomas T.; HOGAN, John E.; ZALE, Joseph. The Strategy and Tactics of Pricing. 6th ed. New York: Routledge, 2016.
PORTER, Michael E. Competitive strategy: techniques for analyzing industries and competitors. New York: Free Press, 1980.
REVISTA SOBERANA. Study reveals the factors that influence the perception of value in the retreading of truck tires in Brazil. Feb 23, 2025. Available at: https://revistasoberana. com. br/. Accessed on: Aug 26, 2025.
RODRIGUES, M. A.; ALMEIDA, D. R. Consumer behavior and demand elasticity in Brazilian retail. Strategy and Business Journal, v. 14, n. 3, p. 55–70, 2021.
SAMUELSON, P. A.; NORDHAUS, W. D. Economics. 19th ed. Porto Alegre: AMGH, 2012.
SILVA, Nelson Pereira da. The effects of ICMS tax substitution on the collection of the Federal District. 2023. 71 f. Dissertation (Professional Master’s in Public Administration) – Brazilian Institute of Education, Development and Research, Brasília, 2023. Available at: https://repositorio. idp. edu. br/handle/123456789/4211. Accessed on: Aug 27, 2025.
SOUZA, C. R.; MARTINS, F. C. Price and percep
Executive summary from the Final Project of the Specialization in Finance and Controllership of the MBA USP/Esalq
Learn more about the course; click here: