Tyre e-tailing gaining appeal

With many tyre brands vying ever harder to find new routes to market, the appeal of the Internet is obvious across Europe despite a few obstacles on the way. Brand-specific web shops are a clear attraction.

With one estimate claiming that internet sales of tyres across Europe will reach 5.5 million euros annually by 2021, this is a bandwagon to watch. With many tyre brands scratching ever harder to find new routes to market, the appeal of the internet is obvious and even perhaps a last resort.

As this column has commented on before, the efforts of the major manufacturers to strengthen their hold on retail distribution and increasingly to buy up wholesalers too will inevitably reduce the scope of smaller brands to reach the consumer. Against the backdrop, brand-specific web shops are a clear attraction.

There are a few obstacles in the way though. The first and foremost, tyres have to be fitted; so retail fitting points need to be established, or do they? As the number of independent tyre retailers continues to shrink, the growth of tyre e-tailing may just be what is needed to give a boost to mobile home fitting services. This would have some clear advantages in that valuable add-on services such as balancing, old tyre disposal etc. and would be less vulnerable to ‘poaching’ by fixed site retail fitting points so adding value to mobile tyre fitting franchises.

Michelin was one of the first to spot these opportunities with its purchase of the UK’s phone/internet tyre retailer Blackcircles. But companies like Goodyear are following. Now GITI is weighing in with its own web shop in Germany with no doubt more to follow across the continent. It makes sense.

Performing Pirelli

Italy’s Pirelli, which was bought outright by ChemChina some two years back, is now about to return to the Milan stock-market after some major surgery. At the time, the deal was not as controversial as might have been expected, but perhaps the Italian tyre maker did not quite share the same ‘national treasure’ status as a Michelin or Continental.

ChemChina has approached its acquisition decisively consigning its lower margin truck and other products into its Shanghai operations. Sensible, Pirelli was not strong in these sectors. Higher margin performance car tyres image-boosted by Pirelli’s involvement in Formula 1 remain the core of the new European operation but the stock market has rather wisely shown caution by valuing the group slightly less than the price at which it de-listed in 2015.

Pirelli is nothing but ambitious, expecting to achieve a nine per cent annual revenue growth through to the end of this decade, 50% more than it achieved prior to the ChemChina sale and three times the industry average, according to the UK’s Financial Times newspaper. 

In a market rapidly heading toward hybrid and electric vehicles we will wait and watch.

China and the EU

The European Commission’s investigation into the alleged dumping of truck tyres in European markets rumbles on with the likelihood that some Chinese brands at least will be found culpable.

A lot will depend on the response of the Commission itself in addressing the issue for it is undoubtedly the case that certain brands have more questions to answer than others. So, might the Commission impose blanket duties on China-made tyres or more brand selective US-style duties? There is a lot to play for here.

Names like Saliun and Aeolus (aka Pirelli) have sought to establish themselves alongside the responsible main stream of world brands; but there are a myriad of smaller brands that have not. For many of these, the European marketplace may well prove a much more hostile and unrewarding one in the future. With other countries including India taking aim at China-made tyres, it once again raises the question of how quickly China will get to grips with its now-pressing need for consolidation in its tyre manufacturing sector.

EU points finger at China

Well, it had to happen; the European Union has announced it will start anti-dumping proceedings against China in respect of its ever-swelling volumes of truck tyre imports into Europe.

The EU is already treading (sorry about the pun) a well-trodden path in this respect behind the US, India and others. As these markets got tougher for China’s tyre producers, many turned their sights to Europe only to force already depressed prices even lower. Not clever.

Chinese Heavy Truck (TBR) imports into the EU

The consequences have been serious and not just for new tyre prices, retreaders have been hit even harder. Typically, these cheaper Chinese products easily undercut locally-produced retreads and there have been casualties amongst retread manufacturers whose anguish has been loud and vocal.

The real question is why Europe’s ivy-league tyre makers have been so slow to respond?

One reason, of course, must be that they themselves all produce tyres in China so are reluctant to be overly vocal in reacting to the situation. This is amply evidenced by the way in which the EU has been nudged into retaliatory action by a hitherto unheard of body coyly calling itself the Coalition against Unfair Imports. However, this curtain behind which they hide is rather thin and made all the more so by the claim that they collectively represent more than 45% of the total EU production of new and retreaded truck/bus tyres. I am just surprised it is as low as that; but with Pirelli already in Chinese ownership I suppose we can discount them.

This is all rather reminiscent of a scene in Agatha Christie’s famous novel and movie Murder on the Orient Express. As the train’s lights mysteriously fail, the victim is killed from multiple stab wounds from a group of vengeful passengers none of whom could be individually accused. Now let’s turn the lights back on.

There is little doubt that Europe’s retreaders are suffering as a result of this deluge of cheap mostly one-life truck tyres primarily from China and something is needed to be done before the damage got too great. Retreading is environmentally beneficial and we should not be afraid to say so. It also provides employment for many thousands of workers which is presumably the same rationale used by China as it continues to prop up some producers whose day has come, and gone.

However, there is still just a little time left for the Chinese. The EU moves at glacial speed and its investigation of the anti-dumping charges against the PRC will extend over 15 months starting June 30, 2017; so, even if the case is proven, China still has time to fill a few more of those containers and 2018 may prove yet another hard year for members of this shadowy coalition against unfair imports.

*Peter Taylor was the Director of Imported Tyre Manufacturers Association (ITMA) London. He is the founder and secretary general of the Tyre Recovery Association and a member of the Used Tyre Working Group since its inception. In 2009, he was awarded an Order of the British Empire for services to the Tyre Industry. A renowned tyre industry expert, Taylor is a regular columnist for Rubber Asia.