EV tyre sector leading the race to recovery: Comparing recent developments in the Chinese and European tyre markets

During our recent visit to China, on the sidelines of the GRTAE expo hosted in what can only be described as the tyre capital of the People’s Republic, Tyres & Accessories enjoyed a panel discussion with Car and Tire editor, Alex Shi. Formerly an executive within the tyre industry – including time with Goodyear – Car and Tires focuses on business-to-business communications and is particularly strong when it comes to tyre testing and in the social media space. Indeed, they are something of a force online, with some 300,000 followers on WeChat, which is a bit like WhatsApp is here in the West. True to form, not only was our discussion hosted in the main meeting room at GRTAE, it was also video recorded and streamed live to a potential of hundreds of thousands of Chinese-language followers in the East. Beginning with the current state of the respective Chinese and European tyre markets in light of recent macro-economic market trends, our discussion then moved onto the similarities and differences between the European and Chinese online tyre sectors (see part two).

Tyres & Accessories: I haven’t been in China for three to four years. Everyone knows the reasons why, so what’s happened here since then?

Car and Tires: OK, actually we have experienced a very hard time during the pandemic as everyone knows. But from last year…the tyre business in China [has been] totally getting out of that sluggish market and actually most of the tyre manufacturers in China last year gained a lot of money even though the manufacturers, who have experienced losses, have gained money last year due thanks to very strong exports to other countries. Because last year, you know, thanks to the currency exchange rate, which has changed a lot,…a lot of Chinese manufacturers have benefited from that, so. In terms of our domestic market,…Chinese tyres are gaining market share as well because…new energy…green energy vehicles in China have experienced a very quick rise in China and so, accordingly, tyres[as well]. The tyre business has been…totally impacted by this trend.

T&A: That’s right the vehicles look different, there are far more taxis that are electric vehicles and cars in general that are electric vehicles compared with just five years ago. I think that’s one example of what you’re describing.

C&T: Oh exactly. Exactly there is a lot of change compared to five years ago…Two weeks ago, I went to Shanghai for a business trip and I took a lot of electric cars as taxis and that amazed me a lot too. A lot of change, even for me. So, in the tyre business…a lot of Chinese manufacturers are benefiting from this trend and their tyres are starting to replace foreign brands like Michelin, Goodyear, Bridgestone in China, so…we have a rise, a very good rise [in the domestically-produced share of the domestic car tyre replacement market].

T&A: That’s something else. Back in the UK, and we have to say Europe is made-up of 27/28 countries with different economies, our economy has been celebrating 0.6 per cent growth. Here it’s 6 per cent. And people call this recovery. To me, that’s explosive. So how much do you think this shift in tyre market share is to do with the growth of the overall economy and how much of it relates to these structural factors?

“Chinese tyres are gaining market share as well because…new energy…green energy vehicles in China have experienced a very quick rise in China” – Alex Shi

C&T: …I think it’s especially the structural impact actually. Even though that’s a huge amount of GDP growth, but, compared to our original speed of growth, [the Chinese economy] has slowed down a lot…So we don’t, I don’t think…we benefit a lot from GDP growth, but the structure has totally changed this year at the in the beginning of this year, China’s export of electric cars has surpassed Japan and become the become number one in terms of car exports. So, I think electric cars contributed a lot to that…growth, to that change. Chinese manufacturers [are] increasingly getting the profit from it.

Hosted in the main meeting room at GRTAE, it was also video recorded and streamed live to a potential of hundreds of thousands of Chinese-language followers in the East (Photo: Xuda Wang/Tyre Industry Publications Ltd)

T&A: When it comes to electric vehicles and tyres, we have seen a number of different approaches from the different tyre manufacturers. In short, they seem to work something like this: We are a premium company, so our tyres are simply high-quality enough that they work with electric vehicles which require higher weight capacity, high speed ratings etc. Then there are those that insist on EV-specific tyres. How has that translated into the Chinese market?

Chinese EV tyre philosophies

C&T: …I’m so glad you brought this question because that’s…something Chinese manufacturers have been thinking about and even arguing [about] in the past two years. Actually, we hesitate between [EV-specific] and high-performance tyres. [For example] tomorrow I’m going to another manufacturer here in Shandong. [And] I’m going to attend their electric car conference. They are trying to promote their specific electric car tyres. [But right now]…I think the trend here in China is that the customers, the end users…don’t have any knowledge on this. They don’t care about whether it’s electric-specific…or not. But the manufacturers are starting to think about this question and I think the trend is that most of the companies, most of the Chinese tyremakers will introduce specific electric car [tyres] in the near future. We have several [that are] going to introduce and present their new type of electric car tyre. A lot of companies will do that. I think that will become a trend even though we are not quite sure how the customers will react.

T&A: Referring to the UK, where we are now getting evidence that not putting any specific EV tyres on leads to faster tyre deterioration due to the different construction and compounds required for electric vehicle tyres. That information comes from the UK annual road worthiness test [known as the MOT], which shows that electric vehicles seem to be failing more often than internal combustion engines [ICE] on the basis of tyres. There could be lots of explanations for that, but, in short, tyres on electric vehicles appear to be causing their vehicles to fail something like three-times quicker than conventional cars…

C&T: …One day they [consumers] will know. Yeah. Yeah, I totally agree with that. Most of the manufacturers realise that electric cars have different features, so they must have this kind of specific car tyre. But on the other hand, they don’t want to lose the petrol car market as well. They want to still promote a new tyre and they want to sell the tyre to both electric cars and traditional cars. That’s a marketing issue actually. But now [tyremakers] are starting to invest a lot in electric car tyre research…

T&A: Speaking of electric vehicles, that takes us towards the subject of vehicle ownership models when it comes to electric vehicles. Take Tesla, for example, they are selling cars online direct to consumers. Ideas like this bring with them talk of subscription models and totally different ways of doing business – both for cars and tyres.

C&T: Yeah, it’s increasing. It’s increasing, especially for, you know, the new generations here in China. They’re very used to online purchasing. Actually they use…every online tool to purchase their day-to-day goods, so it’s a habit. The habit is there. The only challenge for us is how much we are used to buying tyres online and I think with the three or the three to four big online sales dealers are growing very fast… Like we talked about just now, the biggest online tyre retailer [in China] has gone public at the beginning of this year, and that’s a sign that means their revenue is already very big and they’re still growing, growing very, very fast. 13.6 billion yuan annually already.

Look out for part two of this discussion – which sees us move onto the subject of online tyre sales in China and Europe respectively – at Tyrepress.com and in future editions of Tyres & Accessories magazine.

What began with rapid growth in the electric bus market, something that was visible back around 2018/2019, is now evident in the commercial vehicle sector with the advent of Chinese electro trucks such as this model made by Anhui Deepway (Photo: Chris Anthony/Tyre Industry Publications Ltd)