In Europe, there are too many tires and not enough sales
As we all know, the tire industry is a truly global market with realistically just one end objective — to sell tires, as many of them as possible whether it be in New York, Cape Town or Rome!
Of course a great deal of tire production, logistics and wholesaling takes place before those precious circular pieces of rubber reach their final destination on the retailer’s shelves. However, the fact remains that without actual sales taking place, there would simply be no tire market.
Here in Europe, the subject of tire sales is a hot topic of conversation right now as without any doubt it was a tougher year in 2013 in terms of sales performance than in 2012 and 2011. In fact, the general opinion among retailers and wholesalers is that sales were down by an estimated 20% last year.
It’s true that most tire dealers in Europe are not publicly listed, so data is not available for confirmation. But having spoken to a number of market players, it seems this decline did indeed happen.
Looking at the tire market’s performance across Europe in the past few years, I can see that between the closing months of 2011 right through to the first quarter period of 2013, passenger car tire sales were reduced by around 15% (35 million tires) leading to a situation where stocks of both summer and winter tires reached an all-time high during 2012.
At the same time during this difficult period, Europe suffered from two really harsh winters, meaning there was a significant surplus of summer tires after a prolonged winter season in some countries.
It’s obvious that such drastic weather conditions were partly responsible for this unfortunate situation. However, it must also be pointed out that quite clearly a reasonable percentage of the blame can be placed at the door of European wholesalers as a whole and how they responded to it.
It seems the “over-supply” problems were most prominent in Germany, Italy and the UK. So when you consider that Germany and the UK are two of the most competitive tire markets in Europe (along with The Netherlands) due to their high amount of leading national equity retail chains, it is not surprising that far too many tires were available in a clearly saturated sales environment.
Online price comparisons
However, in looking into this situation a little deeper I have discovered that another important factor has to be the growing presence of online tire price comparison websites which has initiated several other contributory factors. None more so than tire dealers becoming even more savvy on prices and using this knowledge to negotiate extremely aggressively in their favor on discounted price terms.
Meanwhile, retailers have also suffered as “switched-on” customers are also using the comparison sites to their advantage by visiting a tire outlet on the premise of requesting prices then going away and purchasing online at a considerably cheaper price. At the moment it is estimated that around 6% of tire sales throughout Europe are carried out online and it is firmly believed by a number of influential sources in the market that this percentage will continue to rise to as much as 22% by 2020.
Looking at the above statistics it is hardly surprising that both retailers and wholesalers in Europe are fully aware they may have a tough fight ahead of them in the future if they want to maintain a healthy sales profit.
So what about 2014? Well rather surprisingly, six months into the year and most players are optimistically reporting that they anticipate that the sales of premium and budget tires will rise slightly this year, but not by a great deal. The crucial factor will be in the coming winter months when hopefully sales of winter tires will do well between September and December.
At Europe’s largest tire show — Reifen 2014 held in Germany at the end of May — the general feeling I received from wholesalers and retailers alike was a quiet confidence that the market will slowly recover from a couple of difficult years and this year so far looks encouraging. ■
John Stone has been working within the global tire industry for the last 20 years. In 2004 he launched his own company, Sapphire Media Services, as a business media consultant with clients around the globe. Stone also writes for tire and automotive-related publications in Europe, South Africa and Asia.
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