‘There are no bad tyres’
Al Dobowi Group chairman Surender Singh Kandhari’s spoke on “the emergence of budget tyres” at the recent Automechanika Middle East his argument that there is no such thing as a bad tyre may have raised some eyebrows, but it certainly got the audience thinking. Highlighting that the combination of ambitious manufacturers based in emerging markets and increasingly tough legislation has seen so-called budget brands rapidly increase sales volumes and standards, his most memorable comment came when he posited: “There are no bad tyres; only good ones and better ones.”
When Tyres & Accessories asked how this view compared with Michelin’s published opinion that the forthcoming European labelling laws will lead to a roughly 30 per cent reduction in the number of Chinese firms able to export to Europe, he answered with his view that these firms won’t be able to survive as exporters and won’t be present in markets like Japan (which already has labelling), Europe after 2012, and then the US, followed by markets such as Brazil and the Middle East. Therefore, he explained the legislation will demonstrate that “bad tyres don’t exist.”
His argument is based on the observation that recent years have seen various international tyre market become increasingly polarised. With most tyres being classified as either budget products or premium products, there has reportedly been an inevitable constriction of the middle ground. The apparent flaw with this bipolar view of the market is that distinctions relating to premium or budget quality up till now have largely been made on the basis of price. The argument is that this alone does not always fairly equate to either quality or value.
Referring to the amounts leading tyre manufacturers, who products are commonly referred to as budget tyres, Kandhari continued: “No-on spends US$200 million on building a factory to make bad products.” His view is that premium brands, which he prefers to call legacy brands, are fighting hard and increasingly being forced to compete with the budge/economy/mid-range portion of the market.
While some might see the 2012 labelling laws as being the best way of separating the wheat from the chaff, Kandhair was optimistic about the performance of lower-costs products: “When economy tyres achieve a B or C rating, they are as good as a premium.” The obvious inference is that some budget tyres are expected to reach this level, a comment that particularly striking when you consider that Surrender Singh Kandhari’s Al Dobowi business is responsible for distributing the Westlake and Infinity brands (produced at Hangzhou Zhongce and Linglong respectively) through distribution partners across major tyre markets in Europe, the middle East and Africa.
‘The Internet has helped‘
“The Internet has helped a lot. 8 – 13 per cent of Europeans buy tyres online” Kandhari said during his presentation, pointing out that online shopping has made consumers conscious of the price they pay for tyres. Perhaps as a result, markets across Europe as a whole are said to be witnessing budget sectors growing 10 to 20 per cent a year. Concrete examples are the 20 per cent and 28 per cent shares budget tyres now occupy in Italy and France respectively. As fast as this growth has been, with Al-Dobowi estimates suggesting that Budget tyres now account for 52 per cent of sales in the UK market, this is proportionally more tyre sales than any other.
A future impetus is likely to be Chinese manufacturers’ continuing efforts towards gaining OE. If they are successful at winning over some high profile names they will have scored significant points towards winning “the ultimate argument for quality” said Kandhari, adding that while “there are no bad tyres, only good ones and better ones…the future trend will be that price has to be good and quality has to be good.”