Successful Debut For TIF Question Time

An innovation on the day of the NTDA's recent Annual Dinner was a "Question Time"-style seminar, in which a panel drawn from all sectors of the tyre industry answered questions from the floor. Here’s our synopsis of questions, answers and comments from the delegates. The event was sponsored by the Tyre Industry Federation and it attracted an audience of more than 30. TIF chairman Peter Gaster chaired the panel and the other members were: Alan Baldwin, Micheldever Tyre Services; Mark Brickhill, Goodyear Dunlop Tyres; Derek McMartin, Maxxis UK; Patrick O'Connell, Bandvulc Group; Noel Pope, Merityre Specialists and Tim Stott, Sapphire Energy Recovery. Thus, between them, the panel covered all segments of the tyre business, from manufacturing and importing tyres, to wholesaling, retailing, retreading and scrap tyre disposal. Here's a summary of what was said:

Question: Recently, the Americans imposed a 35% levy on Chinese-produced tyres imported into the USA. What impact is this likely to have on the UK market?

Panel answer: The effects are already noticeable as we have seen a serious decline in budget tyre prices. The UK has and will continue to be a dumping ground for the cheapest tyres.

In the USA, wholesalers have been aware of the possibility of a tariff for some time and have been stocking up before the tap was turned off. The tyres that were going to America will have to go somewhere, although some tyres produced for the US market may not be suitable for Europe.

US tyre manufacturers have been fairly neutral about the subject. Manufacturers tend to think that tariffs do not help and this legislation has been largely driven by US trade unions.

Supplementary question from the floor: What will be the effect on mid range and premium brands?

Panel answer: Prices of mid range and premium brand tyres will be dragged down also as the premium manufacturers will have to defend their markets. A drop in budget prices will be disastrous for all of us.

There will be an adverse effect on product quality and the quality of some products already being sold in the UK is the worst in Europe, if not the world.

There could also be a potentially harmful effect on retreading, as an increase in sales of Chinese tyres will lead to more Chinese casings on the market, which could be a problem, both in sizes and quality.

Question: The current economic downturn has seen an increase in sales of budget and mid-range tyres. When the recession ends, is this trend likely to continue?

Panel answer: Leading on from the previous question, there is a lot of tyre manufacturing capacity in China. As the world comes out of recession, this will include China and a growing Chinese economy might absorb many more of these tyres, reducing the numbers for export.

Supplementary question from the floor: What proportion of the US market is accounted for by Chinese-made tyres?

Answer from the floor: Estimates are that somewhere between 40 and 50 million Chinese-made tyres are due to be supplied to the US this year.

Supplementary question from the floor: Is it likely that the EU would impose a similar tariff on tyres from China?

Panel answer: This would be very unlikely to happen.

Going back to the original question, the answers so far have applied mainly to car tyres, but truck tyre sales in the UK are down as fleets economise.

If you sell premium truck tyres, you have an advantage as fleets tend to choose premium brands as first fitment.

Fleets are also good for retreaders, as they concentrate on PPK over the life of the tyre, rather than looking for short-term gains.

Retailers are experiencing a shift from mid-range to budget tyres. Budget sales are doing well and premium sales are generally holding up; it’s the mid-range sector that is being squeezed.

Supplementary question from the floor: Is there a shift towards mid-range brands being fitted as OE on cars?

Panel answer: Hankook is probably the best example of this and what is their share of the OE market? 5% perhaps?

Supplementary question from the floor: Is the car retread market doomed?

This question led to a straw poll among the retailers present in the audience and the most common answer was “we don’t sell any car retreads nowadays”. Many said that they do not bother to stock car retreads any longer.

Question: Do you envisage further environmental moves from Government to encourage recycling and retreading? For example a carbon tax on new tyres would make retreads more attractive.

Panel answer: Retreads need to be significantly cheaper than new tyres if they are to sell. The number of companies manufacturing car retreads has declined and a lot of equipment has moved overseas.

Supplementary question from the floor: Why doesn’t the Government abolish VAT on retreads?

Panel answer: The Government tends to let market forces determine the value of products and there is little appetite from Government (or tyre manufacturers) to follow the regulations on retreads route. Were something like this to be proposed, the manufacturers would lobby against it.

In the US, Government vehicles (trucks) have to have a certain percentage of retreads fitted, but nothing like this exists in the UK.

When it comes to environmental matters, the emphasis is now on low rolling resistance and low noise. Labelling will be required on all tyres, enabling the consumer to make an informed choice on product.

Chinese manufacturers want to move their products “up the ladder” and to do this will make them more expensive and this could let retreads back into the market.

Question: Regarding the proposed S-marking legislation, are retailers and wholesalers aware of the regulations and what level of abuse (i.e. ignoring them) can we expect?

Clarification from the floor: The regulations mean that, when the rule is enacted, if you have non S-marked tyres in stock, then you cannot legally sell them on the replacement market. The rules are expected to come into force sometime in the first quarter of 2010 – possibly January.

Panel answer: Look at the precedent: people have consistently sold non E-marked tyres in the UK and nobody has ever been prosecuted for it. Why should we expect anything different for S-marking?

Supplementary question from the floor: Do part-worn tyres have to be S-marked?

Panel answer: No, only new tyres.

As sellers of tyres, we would like to think that our suppliers were aware of the law and supplied tyres that complied.

People will probably ignore the law unless and until an example is made of an offender.

Supplementary question from the floor: What would you consider a reasonable course of action to take if you found someone was selling tyres that do not comply with the law?

Panel answer: Manufacturers and other sectors have had meetings with ministers to discuss forthcoming technological requirements. Some of the things they want will only come at a considerable cost, so perhaps we as an industry should police the situation.

Supplementary panel answer: Surely it is not up to the industry to police the situation – the Government should introduce legislation which it can, and will, support. Perhaps this is something that the TIF should be looking at?

Clarification from the panel: There are many, diverse interests in the TIF; we need to find a common view that we can all get behind and support.

The discussion subsequently broadened out from S-marking of tyres to legislation and enforcement, particularly of sales of part worn tyres and motorists driving on tyres below the minimum legal tread depth.

Comments from the panel: The threat to the industry from S-marking is not as bad as that from part worns and nothing much was done to enforce those regulations.

Last year, around 60% of the tyres we removed were significantly below the 1.6mm level; when it comes to enforcement, there has been a total abdication of responsibility on behalf of the police.

Perhaps what is needed is a truly concerted, industry-wide campaign to better inform motorists?

Supplementary question from the floor: Is it not possible to make tyres that, when worn, become so noisy that they have to be replaced?

Supplementary comment from the floor: We once looked at having tyres that changed colour when worn, but the feeling was that no-one would buy these, unless it was made compulsory for all manufacturers.

Supplementary question from the floor: In these days of TPMS, could there not be something that provides an in-car indication when the tread depth is getting low?

Panel answer: If there were to be legislation introduced, then manufacturers would do it.

Supplementary question from the floor: Why do tyre retailers not put a knife through tyres that are removed with, say, 2mm of tread so that they cannot be re-sold?

Panel answer: By scrapping them prematurely, this could lead to environmental problems.

Comment from the floor: People drive on illegal tyres because they know they won’t be prosecuted. We should be pushing for current legislation to be properly enforced, rather than for an increase in minimum tread depth.

Panel answer: Absolutely – not only would this improve safety but would be good for sales.

Comment from the floor: Could we not lobby insurance companies?

Panel answer: It would be good if insurance companies said “drive on bald tyres and your insurance is invalid.” However, would they want to lose business by driving customers towards other companies who do not have such a clause?

Comment from the panel: The following story illustrates how weak the Government is when it comes to enforcement and safety: we had an NTDA campaign about the age of tyres. VOSA contacted us to ask if we thought 10-year-old tyres were dangerous and we asked whether or not it would be a good idea to check the age of a tyre during an MOT test and the motorist informed? This idea was passed to the Dept. of Transport, who rejected it out of hand.

Comment from the floor: In the rest of Western Europe the problem of tyres with tread below the legal minimum is not as bad as here in the UK. Could it be because most of them fit cold weather tyres?

Panel answer: We come back to lack of enforcement; tyres do not get checked when cars are stopped by the police. The emphasis is all on speed cameras and drink driving.

Question:  Going back to S-mark testing, this will be self-certified by manufacturers. Is this satisfactory?

Panel answer: This is an expensive business and we need ministers to act on illegal products. If I suspected that a competitor was not telling the truth, I would test his tyres, but I believe that the vast majority of the tyre market make and sell good products in a responsible way.

Supplementary question from the floor: Could manufacturers not introduce an easy-to-understand label so that the motorist can see what he is getting for his money?

Panel answer: In the USA, sales are usually made on the basis of features and benefits – more so than in the UK. The training of people we are asking to sell tyres is hugely variable.

By 2012 we will have to show the level of noise, braking performance and grip. This is a great sales and marketing opportunity for the industry to bring this to people’s attention. Manufacturers will need to tell retailers and they will need to train their staff.

Question: How can you effectively measure tyre noise when different surfaces have different characteristics?

Panel answer: It has been said that tyre noise is in fact surface noise, but this legislation means that the Government gets the tyre industry has to pay for any improvements.

Supplementary question from the floor:  What happened to plans to add rubber crumb to road surfaces to improve noise levels?

Panel answer: It has been shown that such surfaces are quieter. Unfortunately, they also last longer – this is something that the large construction companies do not want and they have terrific lobbying power, so it is unlikely to happen.

Question: Does the panel think that the car scrappage scheme should be extended?

Panel answer: For the motor manufacturers, it has been a good thing, but not so good for tyre retailers.

Looking at it at a European level, it has been beneficial for car manufacturers and component suppliers, including tyre manufacturers, but to dress it up as helping UK industry is just ridiculous.

That concluded the first-ever “Question Time” seminar, with chairman Peter Gaster thanking all the panel members and the members of the audience for taking part in what he described as “an enjoyable, frank and informative” debate. It had been, he went on, a successful experiment and he was confident that the format would be repeated at future NTDA gatherings.