TWG sees Continuation of 2010 Trends into 2011

Yesterday saw the Tyre Wholesalers Group Annual Lunch held at the National Motorcycle Museum in Solihull. At the event, TWG chair Ashley Croft reviewed the year in UK tyre wholesaling, saying that “TWG members are fortunate within the replacement side of our market to have enjoyed a year of consistent market size, although the busy first half of the year has been balanced by a quieter period following.” Croft also looked forward to 2011, in which he forecasted “a year of challenges” for TWG members, commented on the rising interest in winter – or cold weather – tyres in the UK and the long-term potential effects of a consistent, large seasonal market; the persistently low availability of product throughout the year; his concerns about tyre labelling; and the education of non-NTDA member retailers. Below, tyrepress.com presents the transcription of his speech.

“What we have witnessed is a continued move from premium brands to mid-range and budget brands as they are perceived to offer better value for money from a price conscious public. New car sales this year are anticipated to be static with last year, with the removal of the scrappage scheme resulting in a significant monthly drop in sales for September and October. With concerns for our economy and the austerity measures being introduced, there can be no expectation of growth from the OE sector for 2011.

“Raw material prices, particularly for oil and rubber, show a continuing rising trend, impacting on manufacturing profits and ultimately tyre prices, although financial results being issued by tyre manufacturers would suggest success in passing these increases on. Margins for wholesalers through this year have evidenced a squeezing as price increase impact to retailers has been held back, whilst at the same time distribution costs have risen as fuel prices increase.

“The outlook for the replacement market for 2011 would suggest a continuance of what we have observed through this year, with potentially further decreases in market share of premium product.

Winter Tyres

“Will we have snow? Certainly last winter had positive effects on the volumes of tyres fitted, and the anticipated resultant slump in sales for March and April did not happen. You could spot those that were able to obtain winter, excuse me, cold weather, tyres as they drove around with smug satisfaction on their faces as opposed to the poor souls with standard tyres fitted who, according to reports we read, were in fear of their lives.

“Certainly everywhere you look in the industry at the moment winter, cold weather, tyres are being promoted with more vigour than a cure for ageing. I am informed by my wife that she has even spotted adverts on the Classic FM website! Interest levels from retailers and consumers alike has undoubtedly risen, and it will be interesting to review this winter and the success of the promotional campaigns in next spring.

“The one thing that does concern me, which by any stretch of the imagination would be a number of years away, is a move to a fully developed separate winter/ summer market along the lines of Germany. The experience of wholesalers and retailers there is that some 60 per cent of their total market is compressed into two six week periods in spring and autumn as the frantic change of patterns is made. The remaining weeks of the year see business levels at very low volumes.

“Were this to happen here, the consequent downsizing to cater for the low business levels experienced through the greater part of the year would see mass redundancies across the tyre distribution network. I understand the plaudits of safety and also the consequent overall market growth may wince at my comments. I also am an advocate of the fitting of cold weather tyres, but its ultimate consequence should not be ignored.

“Availability as low as 50%”

“Our market can only grow of course if the product is available to support this, whether it be summer or cold weather tyres. Despite our market being the second largest within Europe, with a mix of UHP fitments higher than any other country, availability through this year from ETRMA members is probably the worst I have ever known. It is hardly surprising that the share of premium brand sales within this country continues to drop when you can’t get the product.

“With availability at times as low as 50 per cent, it is almost as if the members of the ETRMA have given up on this market and walked away, as despite our members providing better forecasting of requirements than ever, supply against those forecasts is hopelessly inadequate. Challenges our members face going into 2011 will include ensuring continued adherence by our suppliers to the reduction in use of PAHs in tyre manufacturing for tyres supplied into Europe.

“Introduced in January of this year, checking and continued monitoring to ensure compliance has entailed increased work load and record keeping from our members. Advice provided through the Environment Agency has proved helpful, and our members will continue to work with the EA to ensure our suppliers comply. We agree with the recent comments from Snr Francesco Gori, ETRMA Chairman, in his call for greater monitoring of imported products to ensure compliance.

“Concerns” with Tyre Labelling

“I do have concerns however with the subject of tyre labelling. We are fully supportive of the concept of tyre labelling to enable consumers to make an informed, unbiased decision on tyre performance at the point of purchase. Our concerns lay with the last minute proposed changes to the wet grip testing method and reference tyre.

“Whilst we understand the desire to obtain a better repetition of results by using a 16” in preference to a 14” reference tyre, the timescales are such that acceptance of the proposal is not possible before March 2011, and this would then create problems because of limited facilities to enable tyres from our suppliers to be tested in time for the labelling requirement due to be introduced in July 2012.

“The fact that the proposal comes in the form of a fully worked document from ETRTO with ETRMA backing suggests that ETRMA members have had access to this revision ahead of its submittal and before other suppliers have become aware of it. The ETRMA, via Snr Gori, has called for a “level playing field” in reference to other suppliers meeting the requirements of regulations; surely this must work both ways.

“The unfortunate outcome of this is likely to be a delay in the introduction of labelling. The proposal that some manufacturers can test tyres to the “old” system, providing a G (lowest level) grading whilst they wait for the availability of test facilities to test to the “new” benchmark is simply not acceptable, and could be viewed as a cynical attempt to gain a market advantage by those manufacturers pushing for the late testing change.

“As our members would be amongst those affected as importers of product that would potentially suffer the consequence of delayed testing, we see this as an attack on our business.

“Vacuum of Knowledge”

“The education of retailers, and particularly the smaller retailers that are not members of the NTDA, continues to be of major concern. These retailers tend to be outside of tyre trade journal circulation, and as BTMA members now have little representation in the field, a vacuum of knowledge and information availability has been created.

“I raised this concern at this luncheon last year.

“I am pleased to say that the TWG stepped up to what we considered an obligation to attempt to provide information to this sector of the trade, with the publishing of a quarterly newsletter distributed by our membership, with the first issue produced last Spring.

“Topics covered have included s-marking, fitting of new tyres to the front or rear of vehicles, calibration advice, repair of runflats, and information on PAH restrictions. A poster has also been distributed providing retailers with information for customers at point of sale on runflat repair. This autumn’s Newsletter is dedicated to cold weather tyres and the benefits of fitting them.

Looking forward to 2011

“Undoubtedly [2011 will be] a year of challenges, as we juggle rising product prices and fuel costs against the need to remain competitive, with anticipated shortages of supply. It will be a year of opportunities, with expected resilience from the replacement market, and anticipation of consolidation of customers. I see it as a year of co-operation, as closer links and distribution arrangements including product marketing are forged with our suppliers. And I see it as a year of responsibility, as we ensure compliance from our suppliers and continue to inform retailers via our newsletter distribution.”