Comment: Roll on 2015
As the evenings draw in and the temperatures drop, people not only make preparations for Christmas, but also consider the pros and cons of the last 12 months as well as look forward to next year. When it comes to the tyre business it is no different, I am sure we are all looking forward to our Christmas break – but this is also the season for stock-taking, both metaphorical and literal.
When we look back over 2014 there have clearly been a lot of changes. Some, like the changes that have taken place in the upper-middle ranks of the wholesale business were precipitated in 2013 and before, but really manifested in 2014. I am of course referring to the acquisition of County Tyres by Malvern Tyres, which created a new large wholesale player in its wake. Of course, any transaction of this magnitude brings with it its own challenges, but Malvern Tyres took its seat at the table by winning the Wholesaler of the Year award during October’s NTDA Tyre Industry Awards in Manchester. And in many ways this kind of shake-up has been reflected in changes in the make-up of the wholesale business on the continent – take Michelin’s acquisition of Reifen Ihle along with its connected international businesses at the end of October as an example (see T&A November 2014 for more on both these stories).
At the same time we have seen what can only be described as seismic shifts in the UK truck tyre market during the course of the last few years, but once again what had been brewing for some time manifested in the course of the last 12 months. The result was that Hankook and Goodyear are now the two biggest players in the sector in terms of unit market share – a market transformation that we analysed in detail in our September issue (see “Is the UK truck market a five horse race“ and “Wheels of Change“) and then again when we considered the present state and future prospects of the fleet business in our November edition.
With more than 11 months under our belts, this month we are taking a look at the tyre market in 2014 as a central part of our review of the year, which runs from page 22 onwards. The headline conclusion (and it’s probably not a huge surprise to our readers) is that the market failed to make improvements that we and others predicted this time last year – but the real questions are: Why? And can we expect this next year?
Staying on the same theme, it is worth pointing out that market research such as this is all about offering, explaining and qualifying perspectives. No single perspective tells you everything. The shrewd analysis of a range of sources broadens our horizons. As the saying goes, “there is wisdom in a multitude of counsellors”. However, at the same time another proverb warns us that too many cooks spoil the broth. In the hope that we were discovering another example of the former and avoiding the latter, Tyres & Accessories read news of a new UK market report published by Bharat books earlier this month with great interest.
Introducing the new report, Bharat books contexualises its research against the backdrop of “anticipated growth in the UK automotive industry and expansion in the overall automotive fleet”, saying these markets are “expected to boost tyre demand in the United Kingdom”. As you will see in “Everything pointed to UK tyre market growth in 2014, but…“, this isn’t quite how we view things.
As far as tyre manufacturers are concerned the report covers firms such as Michelin, Goodyear Dunlop, Pirelli, Bridgestone and Continental – pointing out that these have at some stage had manufacturing connections to the UK. However, while saying these companies “have plans to expand production capacity of existing plants” is not wrong in general, saying they are “keenly eyeing opportunities unfolding in the UK tyre market” is something of an exaggeration.
“United Kingdom Tyre Market Forecast & Opportunities, 2019”, loftily estimates UK tyre market demand at US$5 billion (£3.1 billion; 3.986 billion euros) in 2014 – beyond even the highest replacement market estimates T&A has heard. For this to be correct it would mean the average car tyre would be £88 (£3.1 billion/35 million tyres). Of course it could be a question of definitions and methodologies (What does this figure refer to? Over what period of time? etc.) however, if this figure refers to the combined car, truck, retreading, OTR, motorbike and speciality tyres segments it would surely be greater.
However, the fact that the “companies covered” list is dominated by premium and high-mid-range competitors is the most significant oversight. A market such as the UK requires good coverage from across the board owing to fact that anywhere between 50 and 56 per cent of unit volumes (depending on who you ask) are made up of budget tyre sales. With this in mind, the lack of coverage of large-scale upper budget and mid-range players (such as Giti and Nexen, who could easily claim 15 per cent market share between them) is another significant oversight.
This is all the more important in light of the latest news from the US relating to tyre import tariffs (see page 32 for more). In short, the news that Chinese tyre makers could be charged countervailing duties of 80 per cent plus and at least 15 per cent is likely to push more low-priced volume to Europe and specifically the UK than ever. In such a context and in light of the market research we discuss on pages 22-25, we have to ask if we are about to experience a battle of the mid-range as the leading global tyre manufacturers rejuvenate the second line and “value” brands on the one hand and low-cost Chinese manufacturers seek to transfer distribution from the US to the UK. In any case it looks likely that 2015 will be an interesting year.
Which leaves just one more thing to be said: A very merry Christmas to all our readers in the tyre industry and beyond and a happy, healthy and prosperous 2015!