Toyo Tire (5105.T) is up 25.6% YTD, driven by strong U.S. market exposure and easing tariff concerns. The company absorbed steep U.S. tariffs to protect its SUV/light truck market share, which hurt Q1 margins. Activist investor Palliser Capital is now pushing for capital returns and governance reform. Meanwhile, short interest has reached a 52-week high as bearish bets rise during the rally.

Toyo Tire (5105 JP) is up 25.6% YTD, handily outperforming the Topix Index -0.5%. The surge reflects strong U.S. performance and easing tariff concerns. Toyo absorbed steep U.S. tariffs instead of passing costs to consumers, impacting Q1 margins.

In early 2025, U.S. tariffs on Japanese tires rose to 24%. While rivals raised prices, Toyo held firm to defend its ~40% U.S. light truck/SUV share. Q1 revenue rose 6.2% YoY, but net income fell 42.6% as the company absorbed costs to protect market position.

This approach underscores that, in this instance, the exporting company bore the tariff costs, not U.S. consumers. Toyo's strategy prioritized market share over immediate profitability, a calculated move to maintain long-term positioning.

Toyo Tire short interest peaked at 9.3m shares on June 2 (¥28.5B / $200M notional). Bearish bets fell in January and again during April’s tariff-driven sell-off, but have since climbed as the stock rallied, signaling rising skepticism amid strong performance.

Activist fund Palliser Capital announced a stake in Toyo at the Sohn HK Conference, reportedly 3% per Financial Times, and subsequently released their report online advocating for capital efficiency and governance reforms. They propose returning $900M to shareholders and exploring strategic options, including a potential sale.

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