Conti: 2009 Market Volume Constant, Segmentation and Value Down

2009 may have been a “turbulent time” in the UK passenger car and van tyre markets, but some premium tyre manufacturers finished the year better than it started; and there are signs pointing to the recovery of premium manufacturer’s sell-in sales. That’s the view of Continental Tyre Group executives, who spoke to Tyres & Accessories at the company’s annual market trends briefing in London in December. As well as presenting the company’s influential overview of market sales and general trends, Conti representatives also gave a fascinating insight into how the government’s highly successful scrappage incentive scheme may affect future car sales.

Continental estimates the UK car, 4×4 and van tyre market totalled 33 million tyres in 2009, a slight drop over the final figure from 2008. However, while 2009 is said to have seen motorists hold off getting new tyre purchases, the overall numerical impact on the market is said to have been limited. Instead Continental re-affirmed that the UK tyre market has been experiencing a so-called “de-segmentisation” effect with consumers buying tyres of lower unit value and brand equity than they purchased pre-recession (something Tyres & Accessories first observed in May 2009 following strong Korean-brand tyre sales the preceding March). What is interesting about Continental’s analysis of this effect is that they are the only company so far to suggest that there is a significant group of consumers that are dropping two segments (premium to budget, for example), double de-segmenting if you will.

The good news for premium tyre markers, who are said to have seen this effect in both the car and truck markets (see separate article for an overview of events in the truck tyre business), is that this is an easier argument to win than the closer premium-versus-quality debate retailers will have to win with consumers who only dropped one segment.

After years of seemingly perpetually increasing rim diameters, and with European tyre buyers now supporting one of the most generally high performance markets in the World, you can be forgiven for thinking the recent success of the scrappage scheme and the resulting mini-boom of super mini car sales it precipitated would mean replacement market sizes are falling. The truth is they are they aren’t exactly.

Downsizing?

There certainly was mini-boom of super-mini car sales in the second half of 2009 and this segment is the only segment in the business that has tripled its third-quarter 2006 sales levels (most other segments did well to maintain 2006 levels), but this doesn’t mean the tyre parc will suddenly find sizes shrinking. In addition to the fact that, despite its rapid recent growth, the supermini segment is still a fairly small slice of the overall pie, there are two reasons for this:

Firstly it is too soon to notice any significant impact on the replacement market for all the cars that were bought with cash for bangers discount. Give it another couple of years – then we’ll see what happened here. Secondly, these cars may be called super-minis, but most come with 16-inch tyres nowadays. As a result, the replacement car tyre market shows further decline over 2008 in rim sizes 13, 14 and 15-inch sizes and growth in sizes over 16 inches. Speaking to journalists gathered for this year’s annual trends briefing, Continental brand manager Tracey Hyem highlighted that this trend is due to the “continuing move towards wider tyres with bigger rim diameters through OE. In fact, most executive cars now come with “17 or 18-inch fitments as standard,” she explained, adding “17 and 18-inch rim sizes had a combined market share of just over 20 per cent in 2009 [and] 15 and 16 do still make up more than 50 per cent of the market.

Other notable movements in the 2009 marketplace include further growth of the number one tyre size (205/55 R 16 V), with this fitment now accounting for more than 10 per cent of the market. However, the 225/45 R17 W/Z continued to move up the top size rankings and is now in fourth position overall, up from sixth position last year.

And what’s more, 2009 saw the first 18-inch size join the top ten. The 225/40 R18 XL W/Z is fitted to vehicles such as the Mercedes C Class, the Peugeot 308 and the Renault Laguna. Two sizes that dropped out of the top ten this year are 155/70 R13 T and 185/65 R15 H.

55 per cent of Mercedes ML sales chose the wheel size upgrade option when purchasing

In the 4×4 market, 16-inch sizes remain the most dominate rim diameter, but this is said to be declining in share along with 15-inch products. UHP sizes, however, continue to gain share of market, tracking the growth of the vehicle parc particularly in Range Rover, BMW, Mercedes-Benz and Porsche. Only last year, Continental reported that the top ten 4×4 sizes were predominately 15 and 16-inch diameters. This year though only four of the top 10 sizes are now 15 and 16 inches.

Five of the top ten sizes are now 18-inch plus, and the 235/60 R18 V – as fitted on the LandRover Freelander 2 and the Volvo XC90 – is now the third most popular size in the market. New sizes into the top 10 this year are the 235/65 R17 V, which fits amongst others the Mercedes M Class, the Volvo XC60 and the VW Touareg, and the 255/55 R19V, as fitted on the LandRover Discovery. One interesting example of the insatiable appetite of SUV owners for large tyres is the fact that 55 per cent of Mercedes ML sales chose the wheel size upgrade option when purchasing there new vehicles.

In Van, 16-inch now represents more than half of the market. 14 and 15-inch continue to decline but are expected to remain a significant part of the market due to fitments on the smaller car derived vans. The 13-inch market is now virtually non-existent. Top ten sizes have again remained stable. The top two sizes are still 15, but it is the 16 segment showing growth. One particular size that has been on the up in the last two years is the 235/65 R16, which is fitted to the hugely popular Mercedes Sprinter and the Iveco Daily.

Looking back at the total market, lower emission car models, such as VW’s BlueMotion range, are said to have been adding to the stabilisation of T and H speed rating sales. However, while both this and the double de-segmentation trend observed by Continental are interesting and pertinent points, neither explain how premium manufacturers like Continental are going to fight to gain or re-gain premium market share lost to mid-range and cheaper competitors. In Continental’s case, overall passenger car market share occupied by the premium tyre maker is said to have been stable in 2009 compared with 2008, but not every company has faired so well.