The Brexit Cloud Continues to Dominate the European Tire Market
As I write this article, America is deciding on its next president after what I’m sure everyone agrees has been a long period of campaigning and arguments. In Europe as well there has been a recent period of debated uncertainty as it is now almost six months since the UK population decided by an extremely narrow 52% to 48% majority to leave the European Union.
Up until now in terms of the global tire industry, the UK has been seen as an important player in Europe by the rest of the world. Europe (as a whole) is seen as a very busy and successful continent for tire manufacturing, distribution and sales. However, “Brexit,” as it is so called, looks set to change that situation although exactly how is not yet clear.
It has been well documented that it will take two years or even longer for the UK to “cut loose” of Europe and even as I write this column there were strong moves by some UK politicians to actually revoke the Brexit decision and stay in Europe. So anything is possible. But I tend to believe (rightly or wrongly) that eventually the European Union will no longer include the UK.
So what effect will this have on the tire market over here? Well, probably not as significant as some people have been led to initially believe. After all, the UK is a reasonably small trading market with approximately 27 million car tire sales per year and over one million truck tire sales. The country has three major tire production facilities for Michelin, Pirelli, and Cooper tires which are all owned by global-based companies.It is also interesting to note that when many overseas tire companies look toward entering and gaining an impact in the European tire sales sector, they nearly always use the UK as their first base market to grow from.
The reason for this strategy is that a large number of established tire wholesalers operate in the UK. Plus, several other distinctions include the lack of winter tire differentiations, a liking for low prices by the buying public and an indifference toward brands by UK drivers.
Also, the UK PCR tire replacement market is renowned for being heavily focused on price levels and currently has one of the highest percentages of imported tires throughout Europe.
It is estimated that import levels are somewhere around 40% and represent as much as 60% of the total replacement market which is set against around 25% in the rest of the EU.
When you consider that it has been widely stated that one of the first developments arising from UK removing itself from the EU will be to (strangely) embrace all European laws into UK laws.
This expected development will potentially cause one significantly large problem for the UK tire industry as the UK is the only country which has so far adopted the EU tire labelling legislation into national law.
So could it be that a consequence of the Brexit movement could be that if the UK does accept EU laws then the EU tire labelling regulations could be scrapped?
Could that really happen? No one really knows at the moment!
I have spoken to a varied number of tire manufacturers, wholesalers and retailers in Europe and to be honest none of them really knows what is going to happen if/when the UK leaves Europe. But the general feeling I get is that Europe will continue on its own without the UK as there are enough member countries to maintain and even further enhance tire sales in all European countries. Although it is almost universally considered that the UK tire market is very vibrant and helps to currently drive the European tire industry forward.
As for the UK, at the moment the tire market continues as usual with an optimistic view of the future. But whether that will still be the case in 2018 is anybody’s guess.
I am anticipating a lot of twists and turns along the way to the conclusion of Brexit and periodically I will keep you informed of this intriguing situation. ■
John Stone has been working within the global tire industry for the past 24 years. In 2004 he launched his own consulting company, Sapphire Media Services, which caters to business media clients. Stone also writes for tire and automotive-related publications in Europe, South Africa and Asia.
To read more European Notebook articles, see: