MOTs worth £177 million a year in UK tyre sales
Together, the increased utilisation of independent contractors on the supply side and record online search figures on the demand side show that MOT testing is booming. Considering that MOTs were put on hold for roughly four-and-a-half months between March and August (let’s not even mention the Northern Ireland MOT crisis), this is good news. Word of a coming MOT spike will be warmly welcomed by the tyre and aftermarket associations that lobbied government for the end of the MOT extension on both road safety and economic grounds. But what exactly does the apparent boom look like? And why does it matter to the tyre trade?
The short answer is that, in normal circumstances, MOTs represent a key driver of UK replacement tyre demand. To put this into context, it is worth taking a look at the latest data relating to last year’s MOTs. Just as we predicted at the start of 2019, the number of MOTs that took place last year reached record levels. Complete data is not yet available, but the latest data issued at the start of 2020 by the agency responsible for MOT tests in Great Britain (DVSA) shows that 15,702,715 MOTs were conducted in the six months between April and September 2019. It may be too optimistic to assume that we can simply double that figure to over 31.40 million MOTs, but it was clearly more than the 29.56 million completed in 2018. So, in the absence of complete 2019 data, we have to work with the 31.40 million figure.
Industry sources generally agree that MOTs generate around 20 per cent of total annual UK replacement tyre demand. However, when you look at the figures, there are signs it could be more. According to one source based on Freedom of Information request data, tyre defects account for 22 per cent of all MOT failures. Other sources referring to other years suggest it has been as low as 8 per cent, making 15 per cent a sensible mid-point. Of course, in order for a failed car to pass its MOT, tyres with illegal tread depth or damaged sidewalls will need to be replaced. This means that in a given year at least 8 per cent of MOT failures result in the sale of at least one tyre. However, tyres should generally be fitted in pairs for safety and performance reasons and therefore such an MOT failure will often result in the sale of two tyres and sometimes a complete set if the other two are nearing changeover time.
So, in order to calculate the impact of MOTs on national replacement tyre demand, we have analysed the DVSA data according to three different scenarios: a pessimistic or “bear” case where the lowest figure for the proportion of tyre-related failures is used and where the sale of only one replacement tyre is realised; the “base” case, which assumes a median percentage for tyre-related failure and that tyres are generally replaced in pairs; and a “bull” or optimistic scenario, which assumes the top end of percentages for tyre-related failures and that two tyres are replaced.
Of course, we know that drivers don’t always replace failed tyres in pairs, but when you consider there are a number of additional reasons why an MOT-related garage visit can result tyre sales apart from an outright failure. For example, many tyres are replaced before the legal limit because of performance or brand requirements and due to season changes or because of an MOT advisory – all circumstances that won’t show up on MOT failure data. Therefore, while clearly optimistic, the “bull scenario” remains useful as a way of offering an insight into the overall effect of MOTs on replacement tyre demand.
When the three scenarios are applied to the last seven years of MOT data, the scale of the influence of MOTs on UK replacement tyre demand becomes apparent. Based on the above methodology, MOTs directly influence 2.371 million unit tyre sales a year based on the base case (see chart for further details). If we assume that the average tyre costs £75 (many cost considerably more), MOT initiated replacement tyre demand is worth around £177 million and perhaps more.
But it doesn’t end there. Bulb replacements are the most common MOT failure reason, followed by tyre and brake-related issues. Both represent work that can be and often is done by tyre and fast-fit specialists. And when you consider that an increasing proportion of tyre retailers are also accredited MOT test centres, the total value to the trade could be double the figures indicated by our scenarios.
Post lockdown MOT boom?
However, all our data relates to the years between 2013 and 2019. And we know that MOTs came to a virtual standstill during lockdown. So, what evidence is there that MOT demand is recovering?
First off, Autotech Recruit reported a tenfold increase in the number of MOTs carried out by its network of temporary vehicle technicians in June compared to May. Almost 10,000 more MOTs were carried out by Autotech Recruit contractors within the same period in June 2019, providing a glimpse of the number of cars which have not been tested as a result of the exemption. By comparison, MOTs plummeted 70 per cent during April and May compared to 2019.
Of course, Autotech looks at the issue from a personnel perspective. Nevertheless, the points raised are relevant to our discussion. If under-resourced to deal with what certainly appears to be rocketing demand, garages and workshops across the country could lose out on a recovery-boosting cash injection. To give an example, according to Autotech, an empty MOT ramp could result in a possible loss in profit of up to £3,000 per week.
“The green shoots of the industry’s recovery are beginning to appear,” Simon King, managing director of Autotech Recruit commented, adding: “However, faced with a backlog of testing, and a potential decrease in staff due to Covid-19, garages need to have contingency plans in place to run at full capacity.”
MOTs one of the most search car-related topics
That’s the supply side of things, but even before the MOT extension cancellation took effect on 1 August, there were strong signs of increased MOT demand on the demand side. One example is the fact that MOT was one of the most searched car-related topics online in June, with over 70,000 monthly search overall.
Commenting on the research, Dan Hutson, Head of Motor Insurance at comparethemarket.com, said:
“During these unprecedented times, people may be concerned about how the COVID-19 pandemic may affect the way they drive, insure and maintain their cars.”
There’s clear evidence of increased MOT take-up based on evidence from both the supply and demand sides . So, with MOTs providing an indisputable influence on a large chunk of the UK replacement tyre business the aftermarket, what should garages do to make the most of the current and future opportunities?
Andy Hamilton, CEO at LKQ Euro Car Parts, commented: “There is now a risk that many motorists may have unsafe vehicles on the road. Recommencing MOT testing is essential in ensuring roadworthiness, and helping keep the UK’s road users safe.”
The evidence of pent-up MOT and therefore tyre and parts demand paired with the fact that many vehicles are covered by an exemption that takes them up to September means there will be a strong winter MOT spike. Andy Hamilton again:
“As an industry, there are steps we will need to take to adapt for the new demand curve that will begin in October and prepare workshops for the high number of tests that will be required throughout the winter months. With this in mind, we’re encouraging garages to prepare now. This includes ensuring testers stay on top of their training to make sure they are ready not just to deal with, but to benefit from this increase in demand. Investments in increased capacity are likely to pay off, so we also suggest training up new testers, and considering whether there’s scope to add another testing bay in the workshop.”
|The impact of MOTs on national tyre demand|
|Financial year||MOTs conducted||MOTs failed||Resulting tyre demand (Bear)||Resulting tyre demand (Base)||Resulting tyre demand (Bull)|
|2019 to 2020e*||31,405,430||8,013,000||641,040||2,403,900||3,525,720|
|2018 to 2019||29,560,831||7,731,619||618,530||2,319,486||3,401,912|
|2017 to 2018||28,877,225||7,571,216||605,697||2,271,365||3,331,335|
|2016 to 2017||28,684,053||7,699,812||615,985||2,309,944||3,387,917|
|2015 to 2016||28,027,320||7,827,865||626,229||2,348,360||3,444,261|
|2014 to 2015||27,688,292||8,056,025||644,482||2,416,808||3,544,651|
|2013 to 2014||27,481,013||8,424,279||673,942||2,527,284||3,706,683|
|Seven-year average volume:||632,272||2,371,021||3,477,497|
|Seven-year average value:||£47,420,413.71||£177,826,551.43||£260,812,275.43|
|Source: DVSA, T&A research||*Estimate based on DVSA 1H 2019/2020 data x2|