A Larger Slice of the Cake – high performance tyre market data

During the 1990s the US television series ‘The X-Files’ popularised the catchphrase “the truth is out there.” But while the programme focused on little green men and other unexplained phenomena, it could have easily referred to the high performance tyre market. The truth about this market segment is, you see, somewhere out there. Yet it is difficult to place one’s hands with confidence upon a single, authoritative source of data that tells exactly how things are and where they are headed. What can really be said about the high performance tyre market?

One thing that can be said with certainty is that the sector, no matter how you measure it, is one that is still growing. While reluctance to comment officially about market activity in the high performance sector prevailed when T&A asked the important questions, representatives from more than a handful of manufacturers commented – off the record, of course – that high performance tyres are indeed high performing tyres. The greatest growth in sales continues to be in the V rated and higher product lines, particularly W, Y and Z products. More than one respondent pointed to high performance run-flats as a particular area of strength.

Official Europool figures support this optimistic appraisal. Throughout Western Europe last year a total of 39,442,027 V and higher rated summer passenger car tyres were sold; this represents 34.3 per cent of the region’s total summer tyre sales. Sales of W, Y and Z rated tyres alone, at 17,698,874 units, accounted for 15.4 per cent of total summer PCR sales. This amounts to, in terms of total unit sales, an increase of 17.3 per cent since 2004. During the same period sales of H and lower rated summer tyres declined 14.6 per cent. Growth at the fast end of the market is taking place at the expense of mass-market tyre sales. Similar findings were released by Michelin during the preparation of this report. Expanding on its first quarter 2008 financial results, the company commented that European sales of S & T rated tyres, products Michelin refers to as the ‘entry’ segment, dropped by more than 5 per cent during the three month period (compared with the same months in 2006). In contrast, sales of its V to Z rated products grew 2.5 per cent in the quarter.

The situation in the UK is more or less the same, although sales of W, Y and Z rated tyres are estimated to be several percentage points higher. Out of a total market that the research company GfK estimates to be 28.4 million units (sell-out replacement market), this then equates to sales of around 5.7 million units in 2007. And it appears that, here too, these are the products where the most positive movement is taking place. A report released by Continental earlier in the year shows sales of W, Y and Z products to have grown 10.9 per cent in the UK during 2007. The best selling single tyre size last year, according to Continental, was 205/55 R16 V, so it is not surprising that a respectable boost in sales also occurred here: sales of V rated tyres grew 7.6 per cent compared with the previous year. The big losers were S and T rated tyres, sales of which dropped by no less than 14 per cent.

However it is now time to complicate matters: When asking six people to define what is and what isn’t a high performance tyre, it is not uncommon to receive half a dozen differing replies. Using a tyre’s speed rating is one way of choosing whether to place it in the esteemed high performance category or relegating it to the mundane world of mass market products – another commonly used measure is rim size.

According to GfK data, 15-inch rims remained the most popular size in the UK during 2007, capturing 31.6 per cent of the market. But although much loved by OE manufacturers, this size somewhat loses its street credibility when it comes to its representation in performance tyre ranges. Most dedicated high performance ranges, if including any 15-inch fitments at all, restrict their offering to only a few sizes, often with a lower speed rating. Any action for performance tyres only appears to get under way at 16-inch, which with a market share of 24.78 per cent is now the second most popular size. Climbing one rung up the size ladder into territory belonging firmly to the performance oriented market, we sales of 17-inch fitments holding a little under ten per cent of the market, and when progressing to 19-inch this drops to slightly over one per cent. If judging the size of the performance tyre market by rim size, products of 16-inch and over held 39.91 per cent of the UK market in 2007; 17-inch and above held 15.13 per cent.

When Tyres & Accessories spoke to one of the top five world tyre manufacturers (whom we cannot name), we were told its estimates showed the UK high performance tyre sector grew by 18.7 per cent in 2007, and accounted for approximately 15 per cent of the total market. This particular manufacturer defines high performance tyres as those fitted to a rim of 17-inch or larger diameter, so its appraisal of the market share held by performance tyres thus tallies with that of GfK. In terms of numbers, the UHP market has been steadily rising since 2001, from a mere half a million units to three million in 2007.

“Most of the early growth could be attributed to 17-inch car market, as some of the most popular vehicles started fitting them as standard, such as BMW 3-series, Mercedes C-Class, VW Golf and Audi A3 to name but a few,” T&A was told. “In fact, 225/45R17 (W/Z) is now the 6th biggest size in the market. The 17-inch car market is now maturing, with growth of only 11.7 per cent. The main growth is now in the 4×4 UHP sector, particularly 18-inch-plus 4X4, which has grown by 40 per cent in 2007.” We were told this growth is due to the rising popularity of on-road 4×4 vehicles such as the Range Rover, the Range Rover Sport (fitted with 275/40R20 and 255/55R19), XC90s (235/60R18) and X5s (255/50R19 & 285/45R19). The same source added that, although growth overall is slowing, they still expect 10 to 15 per cent growth in 2008 over 2007.

Growth in the sector is thus clearly continuing, with performance products taking further small chunks from mass-market oriented products every year. This is music to manufacturers’ ears – high performance tyres remain one of the more profitable sectors. Upon announcing last year that Goodyear would invest US$100 million into its 60 per cent owned TC Debica facility in Poland for the production of UHP tyres, company chairman and CEO Robert J. Keegan said “this investment demonstrates our commitment to drive our growth by aligning low-cost manufacturing with high-value-added tyres.” And Goodyear is not alone in its hopes for growth in the profitable high performance and UHP sectors; within Europe in the last year Pirelli announced the construction of a second plant in Romania for the construction of some four to five million UHP and SUV tyres per annum, and in June 2007 Hankook opened its Dunaujvaros, Hungary facility, intended to produce ten million UHP tyres for European markets each year. The number of factories outside of Europe that have introduced or expanded UHP ranges in the past 12 months are too numerous to list.