Editorial/Comment
WLTP impacting tyre markets
Introduction of the new vehicle emissions and fuel consumption test protocol, the Worldwide harmonised Light vehicles Test Procedure (WLTP) is already having an impact on what wheels and tyres are available in the market. Of course, the size of vehicle wheels and consequently tyres is hugely influential in vehicle carbon dioxide (CO2) and fuel consumption (miles per gallon – MPG) performance and in recent years there has been a trend by motor manufacturers to fit larger wheels to vehicles, including even larger rim sizes as options.
Make tariffs great again
The tyre industry has seen its fair share of import tariffs in recent years. The largest scale of these, across the widest range of products, was initiated by the US against Chinese produced car tyres in 2009. That president has been and gone since then (as have further tariffs on car tyres and OTR tyres), but still tariffs are making a huge impact on the tyre industry in the USA and beyond.
Sainsbury’s, Asda and truck tyre tariffs
At the end of April the UK’s second largest supermarket Sainsbury’s announced that it is merging with the Walmart-owned Asda supermarket. The goal? To push first-placed Tesco off the top-spot and to give the newly combined chain better access to different geographic areas and consumers. Strange as it may seem at first glance, this story can be read across to the tyre market in general and the truck tyre segment in particular (click here for complete coverage on developments associated with the recently initiated European anti-Chinese truck tyre import tariffs).
Truck tyre tariffs to end Chinese import tsunami
The EU’s decision to implement import tariffs on Chinese-produced truck tyres marks a sea-change in both the truck tyre market in general and European governments’ approach to the subject in particular. As of the 8 May 2018, truck tyres produced in China and imported into the UK have become between 52.85 euros and 82.17 euros per tyre more expensive than before. And what’s more, with product registration having begun back in February 2018, such charges look likely to be backdated to February on tyres already sold. This cannot fail to have an enormous impact, but what exactly will it mean for the truck tyre sector?
Why Doublestar’s Kumho purchase is a good idea
15 months after bidding got underway, Qingdao-based Doublestar and its consortium of Chinese banks and investors bought 45 per cent of the South Korean tyremaker Kumho Tire over the Easter weekend. Whatever other clauses are written into the deal, following the release of shares issued for the purpose of the sale, Kumho Tire’s creditors will own a 23.1 per cent shareholding in the tyre maker, down from 42.01 per cent. This makes the Chinese tyre firm controlling shareholders in South Korea’s Kumho Tire.
Cyber security comes to the fore
Bentley has been unveiling what it calls the first hybrid electric super-luxury car at the Geneva Motor Show. Other manufacturers (like Porsche) may disagree with this assertion, but the launch marks something of a landmark for the industry with more and more emphasis being paid to the new generation of electric and hybrid vehicles. Indeed, during the company’s latest financial results, Pirelli’s Marco Tronchettic Provera even spoke about the digitisation of the company’s business as if it is normal – something that was followed by the launch of Pirelli’s Cyber Car in Geneva at the start of March. In short, the Cyber Car system offers an OEM solution to send data from the tyres to the car and from the car to the cloud for the benefit of that particular driver as well as road-users in general.
A maturing industry
For a long time people have referred to the European tyre market in general and the UK tyre market in particular as mature markets. This kind of maturity is generally taken to mean low growth markets that are already well developed. Here markets are significant in size and 1 to 2 per cent growth per annum is normal. However, a number of recent market research reports give us the opportunity to reconsider this assumption on two grounds - firstly, with technology developing as it is, quantitative growth should be considered in a wider context; and secondly there is the qualitative question.
Kumho takeover implosion isn’t the end of market consolidation attempts
No I am not talking about the unqualifiable rumours that Doublestar made an offer of up to 250 million euros for Zenises. Rather, that in the first week of September we learnt that Doublestar’s proposed acquisition of Kumho was collapsing before the firm’s eyes after the Qingdao-Chinese tyre manufacturer asked for a double-digit discount. And it is also worth considering what all this means for the wider tyre manufacturing sector.
Emissions inspections push Chinese tyremakers to the brink
With a headline like that, you could be forgiven for thinking that this month’s column refers to the ongoing geopolitical sabre rattling taking place between China’s North Korean neighbours and the USA. However, as important as the hint of nuclear escalation is, here we focus on how the overheating Chinese tyre market is as close as it has ever been to boiling over. Two key subjects have raised the temperature in the People’s Republic during the last month or so: The European Commission’s (EC) decision to initiate an anti-dumping investigation against Chinese-produced truck and bus tyres; and the even more imminent effects of local environmental emissions investigations within China itself, which have led to the suspension and even closure of numerous businesses in the country (see below).
The clock is ticking for combustion engines and conventional tyres
The UK government has decided to ban the sale of both new petrol and new diesel cars from 2040. The goal isn’t as ambitious as Norway’s, which aims to do the same by 2025. India thinks it can do it by 2031. And France is on par with the UK, also aiming to ban sales of new combustion engine-based cars by 2040. However, in the UK at least, electric cars sales currently represent less than 1 per cent of new registrations. Therefore a lot has to happen between now and 2040 for this new rule to become reality. What is clear is that there is now real legislative momentum in favour of electric vehicles in the UK and that this will have an inevitable impact on OE suppliers, and in turn the UK replacement tyre market, especially in three key areas: weight, torque and rolling resistance.
The ethics of tread depth
At the end of last year, during the Paris Motor Show, Michelin reaffirmed its position on tread depth. The leading French tyre manufacturer believes a tyre should perform well throughout its whole life. And seeing as the European legal tread depth limit is 1.6mm, this means all the way down to this particular tread depth. Taken in isolation, this is a strong argument that basically no-one would contradict. So why did we immediately receive strong feedback from companies and associations? What are the counter arguments? And what are the implications of adopting such a stance?
Re-globalisation of the international tyre market?
In the last few weeks, Apollo has initiated production at its new Hungary tyre factory and launched a brand new European truck tyre range (see Company News section pages 32 – 24); Doublestar has confirmed that it is the only remaining bidder in the race for 42 per cent of Kumho Tire (see pages 36 - 37); and as we went to press, Finnish tyre maker Nokian announced that it will build its third production plant, this time in the USA. All this points to what we might call a re-globalisation trend. Rather than businesses from the large so-called developed nations expanding around the globe, this second wave of international expansion sees the roles reversing to some extent. While before the Western nations were looking to invest in fast-growing “emerging” economies, now the proverbial shoe is on the other foot and large companies in what used to be called the BRIC nations are investing in more developed tyre markets.
[Tyre] cost of ownership
As we transition into spring, many think of new-born lambs and flowering bulbs as symbols of the new life of the year ahead. However, for accountants and many others working in the finance side of things, the beginning of April marks the end of the tax year. Along with the end of the tax year come a reasonably regular slew of motorist spending analyses. Two such surveys caught Tyres & Accessories’ eye because they offer insights into what the tyre-related “cost of ownership” is in practical terms.
Trending? Tyres and economic trends
The UK economy grew 0.6 per cent in the October-to-December period. Taking the year as a whole, the economy grew 2 per cent, 10 per cent slower than the growth of 2.2 per cent achieved in 2015. Good news, I hear you say. But, as with many things in life, the details tell a more complicated story. Many sources, such as the BBC, contend that this better-than-expected growth is because of increased consumer spending during the last quarter of the year. However, it is also worth pointing out that UK car production achieved a 17-year high in 2016, according to the latest figures published by SMMT. This comes at the same time that the motor manufacturer’s association reported new car registrations of just under 2.7 million for the year – itself another record. This being the case, it is worth taking a closet look at the figures and the messages give us in the inextricably linked tyre sector as well as the economy as a whole.
Amazon’s increasingly influential role in tyre sales
This year Amazon really stepped up its presence in the tyre space, especially in the USA where the company is now dominant across online retail in general. To be specific, a whopping 50 per cent of everything bought online is from Amazon. But these figures are not just an American phenomenon. In the UK, 33 per cent of online retail is conducted through Amazon. This makes Amazon the fifth biggest retailer in the UK, just behind the big supermarkets. The point is that, now we know Amazon is moving into the tyre space, anything that is happening in the US has resonance in the UK market as well.
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