Light Vehicle Tyres: (Rapra market reports)

The tyre industry is the largest single rubber manufacturing industry in the world. The high performance demanded of tyres has led to extensive research and development in this field and constant innovation. This report takes an overview of the latest technology combined with the market situation worldwide. Three large companies - Bridgestone, Goodyear and Michelin - now dominate the world tyre market with a share of about 56 per cent. There then follow four mid-sized companies, which have about 18 per cent of the world market-Continental. Sumitomo, Pirelli and Yokohama - with a combined share of 17.6 per cent. In total eleven companies account for 81.6 per cent of the world market. Even though the largest companies have a turnover well in excess of USD10bn, they remain largely specialist tyre manufacturers. Many of the smaller companies also concentrate almost exclusively on tyres. However, the medium-sized companies are diversifying away from tyre manufacturing. Unusually, if not uniquely in the automotive components industry, the tyre manufacturers only sell a minority of their output to OEMs. The key factor that distinguishes the tyre market from any other automotive component is the size of the replacement market or aftermarket - three-quarters of road tyres are sold as replacement tyres and only one-quarter as original equipment. The big three tyre manufacturers dominate the OE market, but other large regional players also have a share, particularly in Europe. Worldwide, the replacement tyre market for light vehicles represents about 714m tyres. The replacement tyre market is certainly more profitable for the tyre manufacturers but it has distinct problems. The general problems of slow growth and market maturity are exacerbated by cyclical growth in supply to OEMs. Despite the poor profitability of sales to OE customers and even though the replacement market represents over 70 per cent of the passenger car tyre industry's sales, tyre makers' profitability is also cyclical. The replacement market is a relatively profitable sector of the overall tyre market, but it cannot compensate for the vagaries of the OE market. A traditional indication of market maturity is continual pricing pressure in the market. Although the world tyre market appears to be an oligopoly, there are enough small competitors to keep continual pressure on prices. In broad terms a tyre which cost USD69.90 in 1979 sold for USD41.02 in 2003. The major companies within the tyre industry are all constrained by the laws of economics and subject to similar commercial pressures. In very broad terms the cost of tyre manufacture breaks into three parts: raw materials; labour; and fixed costs. The tyre industry has high fixed costs, making it extremely difficult to improve returns unless costs are cut or market share gained. Raw materials typically represent 25 per cent of the selling price of a car tyre. Labour costs represent about 30 per cent of sales and this has led to a move for manufacture in lower labour cost countries. This has been helped by relatively low transportation costs for the inter-regional movement of tyres - about USD1-2 for a passenger tyre. In the last decade all manufacturers have tried to increase productivity in existing o0perations in order to become low-cost producers. The continuing drive for improved productivity has resulted in excess capacity in many areas and product sectors. The overall outlook for the tyre industry is dependent upon supply much more than demand. There is a close relationship between aggregate supply and profitability for individual tyre companies. As a result there have been gradual moves towards consolidation. Before 1985 a dozen large companies dominated the world tyre market, but after a rapid series of mergers and acquisitions, seven companies emerged with three-quarters of the market.

Table of Contents:
1 Introduction 1.1 Background 1.2 The Report 1.3 Methodology 1.4 About the Author 2 Executive Summary 2.1 Industry Economics 2.2 Manufacturing 2.2.1 Materials 2.2.2 Current Manufacturing 2.2.3 New Manufacturing Methods 2.3 Marketing 2.3.1 Brands 2.3.2 Distribution 2.3.3 Market Niches 2.4 Technical Developments 2.4.1 Legislative Environment 2.4.2 Research and Development 2.5 Recycling 2.6 North American Market 2.7 European Market 2.7.1 West and Central Europe 2.7.2 Russia 2.8 Asian Market 2.8.1 Japan 2.8.2 South Korea 2.8.3 India 2.8.4 China 3 Industry Economics 3.1 Introduction 3.2 World Market 3.3 Industry Structure 3.4 Markets by Product Sector 3.5 Sector Markets 3.5.1 Original Equipment (OE) Market 3.5.2 Replacement Market 3.6 Market Characteristics 3.6.1 Market Maturity 3.6.2 Tyres as a Commodity 3.7 Cost Structure 3.8 Productivity Increases 3.9 Capacity Changes 3.10 Production Relocation 3.11 Consolidation 4 Manufacturing 4.1 Introduction 4.2 Materials 4.2.1 Rubber 4.2.2 Carbon Black 4.2.3 Silica 4.2.4 Steel Cord 4.2.5 Fibres 4.3 Current Manufacturing 4.4 New Manufacturing Methods 4.4.1 Michelin 4.4.2 Goodyear 4.4.3 Bridgestone 4.4.4 Continental 4.4.5 Pirelli 4.4.6 Other Developments 4.5 The Future for Manufacturing 5 Marketing 5.1 Introduction 5.2 Distribution 5.2.1 Wholesaling 5.2.2 Retailing 5.2.3 E-Commerce 5.3 Branding 5.5 Market Niches 5.5.1 High Performance Tyres 5.5.2 SUV Tyres 5.5.3 Winter Tyres 5.5.4 Tuner Market 6 Technical Developments 6.1 Introduction 6.2 Legislative Environment 6.2.1 Environmental Protection 6.2.2 Consumer Safety 6.2.3 Health and Safety 6.2.4 Impact of Legislation 6.3 Research and Development 6.3.1 Research and Development 6.3.2 Materials Development 6.3.3 Tyre Property Improvements 6.4 Runflat Tyres 6.5 Pressure Sensing 6.6 Future Development 7 Recycling 7.1 Introduction 7.2 Hierarchy of Waste 7.2.1 Reduction 7.2.2 Re-use 7.2.3 Recycling 7.2.4 Recovery 7.2.5 Landfill 7.3 Regional Solutions 7.3.1 North America 7.3.2 Europe 7.3.3 Asia 7.3.4 Developing Countries 8 North American Market 8.1 Introduction 8.2 Market 8.3 Supply Structure 8.4 Retailing 9 European Market 9.1 Introduction 9.2 Market 9.3 Supply Structure 9.4 Retailing 9.5 Russia 9.5.1 Market 9.5.2 Supply Structure 10 Asian Market 10.1 Overview 10.2 Japan 10.2.1 Introduction 10.2.2 Market 10.2.3 Supply Structure 10.2.4 Retailing 10.3 South Korea 10.4 India 10.4.1 Introduction 10.4.2 Market 10.4.3 Supply Structure 10.4.4 Retailing 10.5 China 10.5.1 Introduction 10.5.2 Market 10.5.3 Supply Structure 10.5.4 Retailing Abbreviations and Acronyms

About the Author :
Neil Mullineux is a partner in Bowfell Associates, an independent consultancy specialising in market research and strategy for the automotive industry. He has worked in Europe, North America and East Asia for both vehicle and components manufacturers and has undertaken several projects for intergovernmental organisations. He is a Visiting Research Fellow in the Centre for Automotive Industry Management at Nottingham Business School. He has written a series of reports on aspects of the international automotive industry for Financial Times Business and the Economist Intelligence Unit.