European tire crisis? What crisis?

Oct. 18, 2012

Well, having covered tire labelling in last month’s edition, the hot topic in Europe at the moment, (and I will be reporting on this burning issue again following its introduction in November), it’s time to turn my attention toward the other great concern in the market over there. Of course I’m talking about the euro crisis, which continues to fuel speculation of another recession throughout all European countries.

This situation has been hanging around for the past 18 months and at the moment it seems a plan has finally been put in place to ensure the euro currency does not collapse. Only time will tell if it becomes a reality.

So how has this situation affected the tire industry in Europe? To be honest, not as much as some people had predicted or currently state.

It’s true that industry as a whole has suffered, but the tire markets, although obviously affected, appear to be maintaining a positive momentum in production and sales. Having said that, some companies including the major manufacturers will comment that the market is at best struggling and at worst — completely flat at the moment.

However, at the same time there is evidence that tires are being sold at an acceptable level.

For example, a recent independent report reveals that tire production in Europe increased last year with 47 billion tires being produced which is a steady year-on-year increase of 6.6% and amounts to an impressive 24% of the total global production in 2011. Also, the replacement market enjoyed a 4.41% increase with 301.7 million tires being manufactured with the car and light commercial market up by 4.2% (289 million tires) and truck by 9.1% (12.6 million tires).

European tire producers exported over 8 billion euros worth of tires in 2011, a significant rise of 16.4% on the previous year. These statistics indicate that Europe remains stable during a difficult trading period.

It is also significant to note that in the UK, the new “62” registration plates are about to become available and the Society of Motor Manufacturers and Traders (SMMT) predicts that as many as 330,000 new cars will be registered. Couple this with the fact that “personalized plates” are extremely popular in the UK and a recent “plate auction” raised over GBP 4 million (U.S. $6.47 million), which is the largest amount in the past five years.

Of course, performance figures for 2012 have not been produced yet and it is quite possible that percentages have dropped slightly, but I do not anticipate there being a significant difference. Working within the European tire markets I am constantly talking to companies within all sectors and the general feeling at the moment is cautiously positive.

In my opinion the general downturn in trade caused by the “double whammy” of the euro crisis and recession has not hit the European tire market as hard as other industries. With even more cars being produced each year, tire sales are always going to remain steady as drivers have no option than to replace worn tires if they want to stay legal.

When I am driving throughout Europe, it is almost impossible not to pass wholesaler trucks delivering tires to the retail trade many times a day. Therefore, retail sales have to be steady enough to keep the sales market turning.

In my opinion, of far greater concern to the current future of European tire producers is the on-going increase in “low cost” budget tires from China which continue to flood the market. Price has always been and will continue to be the major issue for drivers when buying tires and more and more independent retailers are being tempted by these brands which are “cheap and cheerful” but offer a very reduced tread life span.

These dubious brands are also causing great concern to more established and respected Chinese brands as they tarnish the overall reputation of Far Eastern tires in Europe which are generally accepted as a competitive option.

Whilst there is a cloud of uncertainty in this market through financial problems, the threat of cheap brands will continue and perhaps the expected recovery of the euro will help.    ■

Stone has been working within the global tire industry for the past 20 years. In 1993 he joined Tyres & Accessories magazine in the UK as features editor before joining Tyre Trade News (UK) in 2000 as editor. In 2004 he launched his own company — Sapphire Media Services — as a business media consultant with clients in Singapore, Thailand, India, South Africa, The Netherlands, Czech Republic, Germany, Italy, the UK and Ireland. Stone also has remained working with Tyre Trade News as a freelance columnist and also writes for tire and automotive related publications in South Africa and Asia.