CV Fleets Face Tough 2009

At the beginning of 2008, before talk of the economic slowdown was headline news, truck fleets were suffering from high fuel prices, increased regulation and low-cost competition from abroad. In retrospect, when some of these fleets called in the administrators during the first quarter of the year it was a sign that harder times were coming. But now that it is widely accepted that we are entering a recession, what does this mean for the tyre businesses supplying fleets?

The latest new truck registration data makes fairly miserable reading, but sources within the tyre business are predicting that fleet sales will ultimately be insulated from the worst effects of a recession. According the SMMT data, new commercial vehicle registrations were down 19.2 per cent in September and 0.7 per cent to 377,531 for the year-to-date. When this is broken down, it is clear that the van market has born the immediate brunt of the credit crunch (down 22.1 per cent for the more and 4.6 per cent year to date), with truck registrations actually growing 3.6 per cent for the rolling year. Despite this, some sources have predicted that OEM production could be down by as much as 20 per cent in 2009. The main European tyre manufacturers are taking this trend seriously enough to have cut European truck tyre production by around 10 per cent on average.

Reporting its latest financial figures, Michelin was similarly depressing details of how truck tyre replacement markets have been performing in the first three quarters of this year. According to this data, truck replacement sales were down more than 3 per cent over the nine-month period, but were stable in the third quarter year-on-year. There were strong declines in Western Europe (-7.5 per cent for the 9 months) and in Eastern Europe (-9.6 per cent), while demand remained impressive in Russia (+25 to 30 per cent). Large fleets did better than the smaller ones, as the latter had little flexibility to pass on massive fuel price increases to their customers. The ‘construction’ segment was the most affected while the ‘local/regional’ and ‘long haul’ segments behaved differently from country to country.

Asked about anecdotal evidence that the economic troubles were exposing tyre dealers to the cost of stock bought by bankrupt fleets, Bridgestone UK commercial sales director, Greg Ward, was stoic about any forthcoming market turbulence: “Truck OE may be down in 2009, but this won’t have a negative impact on the replacement market.” Instead increased second hand truck sales are likely to mean fleets will be looking to get another life out of their tyres and therefore generate increased sales for fleet suppliers.

Looking forward to next year, Greg Ward commented: “Fleets have to get through the Christmas period…however by the second quarter things will start picking up. In general the truck tyre business is fairly recession proof as any fleets cutting corners on maintenance will end up losing out in downtime in the end.”

Explaining the tyre’s influence on fuel economy

Global vehicle fleets have seen their fuel bills rise by as much as a third in the last year, according to the latest research. As a result, vehicle manufacturers’ continuous improvements in fuel efficiency are now being swamped by fuel prices, meaning businesses are increasingly looking at other ways of controlling fuel consumption. In recent weeks the onset of the global economic slowdown has put the brakes on fuel prices, but, as the year-on-year figures show, fuel is still long-distance trucking companies’ second largest expense (accounting for 27 per cent of total costs versus 16 per cent in 1999).

The leading tyre manufacturers have been well aware of this for some time and, in response, have been developing low rolling resistance products across both their passenger and commercial vehicle product lines for some time. From their point of view fuel (and therefore emissions) savings are key selling points to original equipment manufacturers. However, they also know the same benefits will pay dividends in the replacement market and that fleets are at the forefront in this respect.

The consensus is that in order to maintain strong working relationships fleet customers tyre suppliers will have to further emphasise the benefits of proper tyre husbandry, pressure monitoring and fuel saving products. To this end the third quarter of 2008 has seen increased activity from the producers of tyre pressure monitoring systems. For example, Safe Europe plc, the manufacturer of Monityre tyre pressure monitoring systems, was the headline sponsor at this year’s FTA Fleet Engineer seminar.

According to Safe Europe’s Operations Director Paul Marriott: “[The] FTA Fleet Engineer seminar, which attracted over 50 delegates, was a great success for us as we were able to focus attention on the fuel saving and environmental benefits from effective tyre pressure monitoring…Under inflation of tyres can potentially reduce their working life by up to 32 per cent. It is also acknowledged that up to 1 in 3 truck tyres are incorrectly inflated, so significant savings can be achieved by utilising an effective tyre pressure monitoring system such as Monityre.”

Safe Europe plc will also be sponsoring the FTA’s December Fleet Engineer seminar, which is taking place at The Thistle Hotel, Heathrow on 3 December.