European Winter Tyre Market Continues to Grow

In the last winter season, the Western European winter car tyre market grew by 7.9 per cent – a fair way above average. During this time some 35.5 million units were sold on the replacement market. As far as the 2005/2006 season is concerned, current Europool figures suggest that it will be another good season for winter and/or cold weather tyres, whatever you call them.

The 4×4 and light truck markets are also likely to demonstrate a continued equalisation between summer and all-season tyres on the one side of the statistics and winter tyres on the other. The European tyre industry claims to be thoroughly prepared in terms of merchandise planning. However one exception is stocks of winter tyres featuring run-flat capabilities.

According to Europool statistics, compiled by the European Association of the Rubber Industry (BLIC), in 2004 162.2 million passenger car and 4×4 tyres were sold in Western Europe (this figure refers to ‘sell-in’ numbers). A year earlier this was 157.9 million units, which equates to an increase of the 2.75 per cent in the Western European replacement market. Two years ago winter tyres accounted for 21.3 per cent of passenger car (PC) and light truck tyres sales figures. In 2004 this ratio increased to 22.5 per cent. In absolute terms this means that in 2003 33.6 million PC and 4×4 winter tyres were sold on the Western European replacement markets compared to 36.5 million a year later. This means that the winter tyre markets in Western Europe have grown 8.5 per cent.

This clearly shows the growing importance of the 4×4 winter tyre segment because, as mentioned above, the passenger car winter tyre market has increased 7.9 per cent. The 4×4 winter tyre market in turn grew by 37.1 per cent up to 1,007,984 units last year.

The Western European light truck tyre replacement market grew 7.3 per cent in 2004, according to the Europool data, and so is slightly lagging behind the average market growth. A trend towards larger sizes has begun to emerge recently.

While sales of 14 inch tyres are on the retreat, 15 inch tyres are better off. But the best sellers in this market segment in 2004 are clearly products in 16 inch plus sizes. Sales of these products have gone up (16.6 per cent).

A similar trend towards higher grade winter tyres can also be seen with the passenger car market, although T-rated winter tyres still account for about two thirds of the overall passenger car winter tyre market in Western Europe. In absolute figures even in 2004 there has been an increase in sales of 6.6 per cent, which is not bad at all. However, this growth of T-rated passenger car winter tyres is 1.3 per cent below the market’s average growth. In conclusion: T rated PC winter tyres are slowly becoming less important.
H and V rated tyres are benefiting the most from recent developments on the passenger car winter tyre market. Last year 508,000 PC winter tyres that allow drivers to travel at speeds up to 240 km/h were sold in Western Europe. This represents an annual growth of 20.1 per cent compared to 2003. H rated passenger car winter tyres have increased their market share and grown by 8.4 per cent, acceording to Europool data. Thus, even this development is slightly above PC winter tyre market average of 7.9 per cent in Western Europe.

UK market: on the up?

While it would be true to say that embryonic is probably the most suitably word to describe the UK cold weather market, it may also be the most promising time for this concept. The industry bodies and manufacturers that are behind the plans to develop this market in the UK, will no doubt be pleased to see Michelin lend its corporate support to the concept. Of course quite how the competing manufacturers and dealers, through organisations like the NTDA, will work together remains to be seen. But in this respect the current situation is encouraging nonetheless.

A look at the data covering the current size of the UK winter market shows there is much work still to be done. But, according to Europool figures has seen, the market (sell in rate) is growing, albeit erratically. Currently the market accounts for less one than per cent of the total passenger car market. In terms of units, sales have yet to break the 100,000-tyre barrier – coming closest in 2002 when sales peaked at approximately 67,000 units. The following year sales took a significant knock, dropping by 60 per cent. The year after that (2003-2004) the market grew 5.4 per cent, well above the average market growth rate.

However, even after this healthy recovery the total number of tyres sold was more than a fifth lower than it was in 2001. There is no clear explanation for this ‘unpredictable’ market behaviour, but it is clear that the weather is likely to have been a contributing factor. Any conditions that more clearly focus consumer attention on road traction have to be good for business.

Now in light of Michelin’s decision to ‘up the ante’ in terms of cold weather efforts, it will be interesting to see just what effect this has on the market, both in terms of direct contribution (Michelin sales) and the knock-on effects of other competitors entering the fray.

Germany remains the largest European market

The most significant winter tyre market is clearly Germany. Sales within the Bundes Republic represent more than half (54 per cent) of the total European winter market. This proportion has remained reasonably stable over the years. Two years ago when the figure was roughly 10 per cent lower (17.7 million units) it represented approximately the same ration across Europe. These figures however, are based on Europool data, which does not include tyres imported from the Far East by manufacturers like Kumho, Hankook or Gajah Tunggal. This is reflected in the figures compiled by German dealer association, the BRV. According to this association, 21.1 million passenger car winter tyres were sold out of the German replacement market in 2004 (sell-out), 10 per cent above BLIC’s figure. One year earlier 20.6 million PC winter tyres were sold in Germany, according to the BRV. This represents annual growth rate of 2.4 per cent. Europool, on the other hand, recorded an annual sell-in growth rate of 8.3 per cent between 2003 and 2004. Such a significant difference between the two figures is likely to point to some kind of stock building within the German tyre trade.

However, the German tyre trade association still reckons that there will be a small increase in passenger car winter tyres sell-out figures this season. According to BRV representatives it is expected that 21.65 million units will be sold which equals an annual growth rate of 2.5 per cent. With regards to the overall passenger car tyre market there should only be a slight growth of 0.3 per cent – this can also be seen as a stagnation of the market.

Rather more growth is expected within the German light truck winter tyre segment. In 2004 about 1.22 million units were sold. In 2005 this figure is expected to grow up to 1.36 million units. In terms of growth this equates to a whopping 12 per cent compared to 2004. In this respect the winter light truck segment is one of the fastest growing segments in the market – the total light truck segment is only expected to grow by 4.2 per cent within the same period.

Scarcity of run-flat winter tyres

Although officials from tyre trade associations believe that their members have taken tyre availability into account, it seems that there will be scant supply of winter run-flats this season. Seeing as Germany is also the largest winter run-flat market in Europe, there are also likely to be supply problems for these top-end products, says BRV managing director, Hans-Jürgen Drechsler. This situation is expected to affect all the manufacturers that offer tyres with run-flat capabilities: Bridgestone, Continental, Dunlop, Goodyear, Michelin and Pirelli. “All of them will have difficulties with delivering winter run-flat tyres,” the BRV confirms referring to market information compiled at the beginning of the season changeover. It is in particular volume production cars such as the new BMW 3 series, which has been available since the middle of the year, tyre dealers the most trouble. The new BMW 3 series is only available with run-flat tyres and yet between March and August about 100,000 of these cars have been sold. This of course means there will be enormous demand for run-flat winter tyres in countries with healthy winter or cold weather markets this season.

The danger of a “potential shortage“ of passenger car winter tyres with run-flat capabilities is also recognised at Pirelli. As distribution director Michael Borchert explains, there is “already a strong demand for these products”. This demand is distributed evenly between all the manufacturers that produce these tyres, according to the Pirelli representative.

For readers that are based in countries that do not have such influential winter markets the numbers of winter run-flats that are sold in Germany are quite impressive. In 2003 about 49,000 run-flat winter tyres were sold in Germany (sell-in), by 2004 this had already grown to 196,000 units, quadrupling the market.

The market is set to triple again, with the total expected to rise to 600,000 passenger car run-flat winter tyres being marketed in 2005. By 2006 this could even reach 900,000. This means a growth rate of 300 per cent in 2005 followed by a further 50 per cent in 2006. Incredibly almost none of the winter run-flats are sold to the OEMs. “Growth is really strong in this market segment,” says Pirelli’s German trade expert, pointing out that growing OEM demand for run-flat summer tyres has an obvious impact on demand for run-flat winter tyres, as exemplified by the example of the BMW 3 series. As a tyre manufacturer that supplies the car industry there would have to be precautions with regards to expected demand growths.

At Pirelli in Germany for example every run-flat tyre – be it the Euphoria, the Sottozero or the Snowsport – is produced using MIRS technology. The problem is these production capacities cannot be increased overnight and are already running at full steam, asserts Pirelli’s sales expert. However, the tyre manufacturer is trying to supply as many run-flat winter tyres as possible in the shortest possible time.

What size the expected run-flat winter tyre shortage will be is difficult to say at this stage of the winter season. But it seems that – at least on the German winter tyre market – car dealers bound by contract to a certain car manufacturer will be supplied preferably by the tyre industry. The German BRV underlines this speculation with a “legitimate claim that we will be supplied in the same manner as car dealers.” For its part Pirelli cannot confirm such a preferential dealer-supplier-relationship in Germany, according to Mr Borchert: “We are resolute advocates of the qualified tyre trade.”