An Uphill Struggle?

Certain tyre industry players have suggested that the green shoots of recovery are already visible in the North American off-road and construction markets (see elsewhere in this feature for more on this) meaning recovery in some markets could begin as soon as this year. However, CECE (European Committee of Site Machinery Manufacturers Associations) figures show that the OE side of the business isn’t really expecting growth to return until 2011. According to the CECE, the machinery market peaked in 2007 with a record year, while 2008 – despite still being worth 30 billion euros across Europe – is characterised as “a crisis year.” Projections for 2009 suggest there will be a drop in orders of around 30 per cent on a European scale compared to the previous – some companies hit lows of 60 per cent in February 2009.

Now, you may be thinking that as far as the infrastructure/construction part of the OTR tyre business is concerned, much of the annual market volume is purchased through the replacement market. However, while these figures only relate directly to the original equipment part of the tyre business, the OEM business can also be seen as a barometer of confidence in the industry as a whole. After all, OEM sales are determined by general economic output and construction demand and if there is no construction work taking place, this will affect both OE and replacement tyre sales.

Looking specifically at the UK, the economy as a whole grew by 0.7 per cent in 2008 and the latest OECD data forecasts a decline of 4.3 per cent in 2009 and 0 per cent in 2010. Construction output in the UK shrank by 1.1 per cent last year and the recent forecasts for the UK suggest an accelerating decline of 3.2 per cent in 2009 followed by a weak pick-up of 0.3 per cent in 2010, gradually strengthening to 1 per cent in 2011. The downturn in this sector is blamed on the collapse of house building, followed by declines in non-residential building. The good news is that there is strong growth in civil engineering where a double digit increase is estimated to have occurred in 2008 and is forecast to continue in 2009 and 2010 before growth eases back to 6 per cent in 2011. By 2011 new civil engineering is forecast to be 52 per cent higher than it was in 2006. CECE predicts that machinery markets will show a further similar decline of 31 per cent this year before returning to 10 per cent growth per year for 2010 and 13 per cent for 2011.

Bridgestone claims UK OTR tyre market leadership

However, 2009 isn’t all doom and gloom as this month’s OTR/Earthmover tyre feature, with news of expanding operations new products and cutting edge test centres demonstrates. One clear example in the replacement market comes from leading tyre manufacturer Bridgestone, which has been quietly achieving consistent growth in both the commercial vehicle and OTR/earthmover segment for the last few years. This year Bridgestone is reporting that its UK share of the earthmover tyre market has increased in 2009 even though the market demand is significantly down on last year. Bridgestone’s UK sales manger, Mark Butcher commented: “Times are obviously very hard for the specialist earthmover tyre dealers, as the vast majority of operators are buying less than half the number of tyres they did last year. The level of service work has, however, increased as operators try to put off replacing tyres for as long as possible.”

He continued: “It’s very reassuring that our customers are increasing the share of our product they buy. When every penny counts, they are looking for the best value in the market place. It’s very noticeable that the quantity of competitor’s budget tyres sales has dropped and operators prefer to buy premium tyres now they have a choice.”

According to the company, Bridgestone now has over 70 per cent earthmover market share in “several key segments.” The company claims this is down to the high performance across its whole range. One example is the recently introduced specialist loader tyre. Called VJT, this tyre is optimised to give low vibration on load and carry applications, whilst delivering high wear life, and has made a significant contribution to Bridgestone, more than doubling market share in the loader segment over the last four years. However, the kingpin of Bridgestone’s strategy is building long term relationships with major customers. Barry Coleman, marketing manager, explained: “This is mutually beneficial. Over the past few years, when earthmover tyres were in very short supply we supported those customers with whom we had such relationships and now we see the fruits of this as they remain loyal to us. We were very careful not to take our customers for granted when demand far exceeded supply. And now we’re having to redouble our efforts to ensure we build on our market leading position.”

Moving onto the question of when will the market recover he continues, “Some market indicators show that we’re now coming out of the recession and that there may even be a boom around the corner! It certainly doesn’t feel like that at the sharp end of the business, but when it does happen Bridgestone will be ready.” And that’s the point. Those in the know, both Bridgestone and its professional competitors appear to be positioning themselves now for the expected recovery, whether it comes this year or in two years time.