Bigger tires in a growth market
It’s a race for market dominance. Consumer demand is causing dynamic shifts in the light truck, sport-utility vehicle (SUV) and crossover-utility vehicle (CUV) market. As this market evolves, tire makers are challenged to keep up with OEM and consumer demands.
This segment started as an evolution of the pickup truck chassis designed with bodies adept at carrying people and cargo. It evolved into different vehicle sub-segments that are more specialized to certain consumer needs, and in a variety of sizes.
“There are SUVs and crossovers that are salient for their performance, like the Range Rover Sport and the Porsche Cayenne,” says Al Mendoza, segment marketing manager, Goodyear Tire & Rubber Co. “They are also salient for their fuel efficiency like the Mazda CX-5, their people-moving/towing capabilities as with the Chevrolet Tahoe and Ford Expedition, their all-terrain capability thanks to optional off-road packages like Chevy’s Z71, Ford FX4, Toyota TRD, and their off-road specialization like the Jeep Wrangler.”
As OEMs continue to shift designs away from traditional body-on-frame construction to passenger car chassis-based designs, many tire makers see demand increasing for CUVs over SUVs.
“New vehicle sales have shifted dramatically from SUVs to CUVs over the past few years while truck volumes have stabilized as a percent of the total,” says Rod Hutchinson, product manager for Bridgestone Americas Tire Operations. “This is causing an increase in the demand for CUV-focused tires.”
Hutchinson says Bridgestone expects CUVs to continue to drive growth of highway commuting and sport tires.
While CUVs gain popularity, customers are demanding bigger tires in this segment. Hutchinson says light trucks, SUVs and CUVs represent about half of the new vehicles being sold in the market. But it’s no three-way split. CUVs and their tires are changing the balance.
“The SUV market will continue to decline, as many consumers have been crossing over to the CUV segment,” says Scott Jamieson, director of product management, Cooper Tire & Rubber Co. “The CUV vehicle gives the consumer the look and functionality of an SUV, with typically better gas mileage and a smoother ride.”
Jamieson says Cooper expects to see the CUV market continue to grow. He sees that same growth with tires.
“Year over year, CUV sales have increased, largely steered by consumer needs and expectations,” says Robert Chew, brand manager, marketing, Falken Tire Corp. “CUV performance continues to increase at the OE level, and we recognized the need for a serious performance CUV tire to meet these demands.”
Chew says that market demand has driven the development of Falken’s Azenis FK453CC, which he says is well-suited for vehicles such as the BMW X5.
“The most growth is in CUV tires,” says Suzanne Mitchell, manager of brand development, Hercules Tire & Rubber Co. “Crossover vehicles are still enjoying tremendous popularity in the U.S. because they offer the versatility of SUVs and light trucks, but often with better fuel efficiency and a smoother ride.”
Mitchell says she is seeing tires designed specifically for crossover vehicles and more and more lines with sizes to accommodate crossovers.
“We introduced our first crossover offering last summer — the Hercules Roadtour XUV — and have had tremendous response,” she says.
“As this shift continues from traditional light trucks and sport-utility vehicles to car-based CUVs, tire manufacturers have also adapted and made the shift to more specialized CUV tires while continuing to offer LT and SUV tires,” says Rick Brennan, vice president of marketing for Kumho Tire U.S.A. Inc. “Tires specifically targeted at CUV owners are steadily increasing because they offer an improved combination of smooth ride, low noise levels and better fuel economy — some of the same features that lead consumers to choose CUVs over SUVs in the auto market.”
“We are seeing fewer and fewer true SUVs and more CUVs,” says Patrick Kirby, business segment director for Michelin North America Inc. “We are finding that very few true SUVs remain in OEM’s portfolios. For example, the Ford Explorer went from being an SUV to a CUV in its 2012 model. However, there are still many SUVs in the vehicle parc due to consumers keeping their vehicles longer.”
“This will always be a strong segment in the tire industry,” says John Hagan, senior director of sales, Toyo Tire U.S.A. Corp. “The future growth will mainly come from the CUV segment and then the SUV segment. The population of CUV vehicles has significantly grown in recent years and the time is coming when many of them will be in need of tires. This is when we will start to see the true demand in this segment.”
And while tire makers expect CUV growth to remain strong, the evolving nature of the market makes it hard to predict the future of the segment.
“The crossover-utility vehicle market is a tricky one,” says Cooper’s Jamieson.
“Traditionally, the tires for CUVs come from passenger lines and/or SUV lines; it all depends on the vehicle platform that the CUV is built on. The current trend for tires is to offer a specific CUV line that focuses on the sizes and speed ratings that are designed for the needs and expectations of consumers who purchase CUV vehicles.”
It’s a matter of size
“Larger rim diameter sizes are gaining a greater percentage of the replacement market in this segment as more 18- to 20-inch OE larger SUV and crossover fitments arrive at first replacement,” says Jon Vance, TBC Wholesale Group director of marketing.
“More traditional passenger tire offerings are increasing the size line-up to include more CUV fitments,” says Kumho’s Brennan.
“These offerings are infiltrating traditional light truck sizes as more CUV owners (and SUV owners) look for passenger tire features such as high mileage, quiet ride and improved ride comfort.”
Brennan says that larger rim diameters are becoming more prevalent as original equipment on sport-utility vehicles and even crossover-utility vehicles. The migration from traditional 16-, 17-, 18-, 19- and even 20-inch rims, is becoming more common.
“Take the 2013 Toyota Venza,” says Brennan. “The OE offerings for this vehicle are 19-inch in four-cylinder and 20-inch for the V6. While this expansion to larger rim diameters is not a new trend as of the early-2000s, tire manufacturers have taken notice and must increase size offerings to match the needs of these newer vehicles.”
“In SUV tires, there appears to be a growing number of larger fitments,” says Hercules’ Mitchell. “We expect to see more LT tires with larger rim diameters carrying heavier loads — many 18-inch sizes, but ranging from 17 to 20 inches.”
“We expect the light truck, SUV, CUV market to grow, especially in the replacement market,” says Hankook Tire America Corp. “We also expect to see larger OE sizes, up to 22-inch, leading to shorter aspect ratio size fitments.”
“We see a higher mix of tires with lower aspect ratios and larger wheel diameters,” says Goodyear’s Mendoza. “New pickup truck sales have also grown in double digits recently and will continue to do so. The vast majority of base vehicle models are now coming with 17-inch wheels and popular upgrade fitments that include 18-inch and also 20-inch tires.”
Keep on trucking
Despite the migration to CUV fitments, the LT segment is holding its own. The current economy is affecting the light truck market as the effects of the recession gradually recede.
“We see the demand for pickup truck tires increase as the workforce grows with the economy,” says Barry Terzaken, light truck product manager for Continental Tire the Americas LLC.
“The current market for LTR tires in general is still quite strong,” says Andrew Briggs, director of product planning, Yokohama Tire Corp. “We expect the segment as a whole to show moderate growth over the course of the next few years. Nearly every vehicle manufacturer’s truck sales have been on the rise this year.”
Briggs says light vehicle sales as a whole have increased in 2012, but many manufacturers’ truck divisions still account for a greater percentage of their overall business. The bottom line is that there are a lot of new trucks, SUVs and CUVs on the road.
“This means continued sales for the replacement market in the future,” says Briggs.
Goodyear’s Mendoza agrees.
“On the light truck side, we see greater demand for larger pickup trucks and heavy-duty trucks,” he says. “As the country comes out of the recession, we see more and more consumers upgrading into newer trucks, whether because they need them for their occupation, or for fun.”
Mendoza says that traction and towing capability are demanded by this consumer, and Goodyear answers that need primarily with its Wrangler lines.
“The light truck market looks to be holding steady,” says Cooper’s Jamieson. “Sales continue to be good, but little growth is expected over the next several years. Cooper will continue to strengthen its Discoverer brands by updating its products with the latest technology giving consumers the performance and quality they expect.”
Large demands on tire makers
As the LT/SUV/CUV vehicle market continues to change and grow, tire makers identify the demands of the consumers driving the replacement tire market.
“Crossover owners are looking for a tire with more tuning for comfort and a quiet ride while delivering tread wear, traction and fuel economy,” says Bridgestone’s Hutchinson. “Meanwhile, all-terrain and mud-terrain tire demand should remain steady with a focus on tread wear, traction and durability.”
“There are a few key trends evident in the segment — growth, fuel efficiency and high customer expectations,” says Continental’s Terzaken. “Vehicles in this segment continue to raise the bar by providing unprecedented levels of comfort, luxury and exceptional handling, while delivering the utility customers need. Improved performance expectations place increased demands on the vehicle’s tires.”
Terzaken says high fuel prices continue to make fuel efficiency a key factor in consumers’ minds. To meet this demand, Continental engineers devised EcoPlus Technology, which is a feature of the CrossContact LX20. Terzaken says it delivers a balance of high fuel economy, strong wet braking and good tread wear through the use of EcoPlus.
“We see that newer models are more fuel efficient thanks to lighter curb weights and progress in engine technology,” says Goodyear’s Mendoza. “Goodyear innovates and answers to the consumer’s need for better fuel efficiency with Goodyear Assurance CS FuelMax, a fuel-efficient SUV tire that provides confident all-season traction.”
Fuel efficiency is certain to remain a top item that consumers and OEMs demand.
“The current trend in this market segment is lower rolling resistance,” says Hankook Tire America Corp. “That is for improved fuel economy and improved tread wear.”
“Gas prices have had an effect on this segment and consumers seem to be sticking to OE fitments,” says John Aben, senior vice president sales and marketing, Nexen Tire America Inc. “Consumers are looking for value, they don’t want to give up comfort and handling is important.”
“With the industry moving toward improving rolling resistance without sacrificing strong performance, P-metric tires with all-season compounds work just fine,” says Eric Yang, automotive marketing manager with American Kenda Rubber Industrial Co. Ltd. “In addition, with a depressed economy, P-metric tires use less rubber to make and are therefore cheaper in price.”
However, the challenge of vehicle fuel efficiency doesn’t relate only to the design of the tires.
“With the high gas prices, auto manufacturers are trying to keep sales steady by offering alternative engines to the popular V8 and making trucks less expensive to run,” says John Wu, assistant product manager for Maxxis International. “Development into increasing tread wear will be the focus of many tire manufacturers. There is still a lot of room to improve in terms of technology in this segment.”
While there will always be room for improvement with tire technology, there is also much reason for tire manufacturers to remain optimistic about the future.
“Research indicates that the tire segment in North America that serves the SUV/CUV vehicle segments is projected to grow 4% per year over the next 10 years,” says Michelin’s Kirby.
“For performance, the manufacturing and consumer focus on value-added features such as car-like ride and handling quality, all-weather, year-round traction including snow and ice and extended tread wear mileage will continue as consumer expectations for ‘kitchen sink’ real world performance drive the features and benefits of these products,” says TBC Wholesale’s Vance. “These performance expectations hold true up and down the price scale.”
Vance says these consumer expectations are due to the trend of the increasing ability of low-cost-country manufacturers to deliver products for this segment that are much more in line with the performance, appearance and sizing demands of the North American SUV/LT market.
“These products will continue to be introduced in the market going forward, challenging the ‘majors’ to seek differentiation through technology and more ‘unique’ value-added features,” says Vance. ■