How direct TPMS manufacturers are preparing for the mass market

Everyone’s talking about the introduction of tyre labelling in November. But we should also be aware that at the same time that the so-called fridge labels are being mandatorily applied to tyres, another rule stipulating that all new cars must fit TPMS is being implemented. The law stipulates that all models homologated since July 2012 have to be manufactured with an appropriate Tyre Pressure Monitoring System (TPMS). From 2014 it will be broadened to include all cars being sold into the market in order to cover any cars not yet mandated. What both dates mean is that there are going to be lots of TPMS equipped cars on the road very soon and tyre retailers need to be ready to service them professionally and take advantage of this business opportunities this provides. It also means that direct TPMS manufacturers are ramping up production in order to meet increased demand from both the OE and replacement markets.

Tyres & Accessories recently had the opportunity to take a look at some of the preparations taking place at leading TPMS supplier Schrader Electronics, which runs two large scale manufacturing operations in Northern Ireland. As well as talking about what the new legislation means for them and their OE customers, company representatives also shared details of how TPMS will potentially fit into the replacement market.

What will take-up look like?

Perhaps the most obvious question is what will post-implementation take up of TPMS look like? And won’t this just mean a gradual take up of the technology as people buy new cars? And won’t there therefore be a lag before servicing and thus aftermarket TPMS sales are required? It aint necessarily so, according to Schrader. Schrader reports that direct TPMS market penetration is currently estimated to be around the 2 per cent mark, a level at which it has been hovering for at least a year. By this time next year, roughly 12 months after the introduction of the law mandating TPMS on new vehicles, direct TPMS uptake is expected to jump up to 16 per cent, before rising to 40 per cent in 2014, 94 per cent in 2015 and 95 per cent in 2016.

Currently around 70 million direct TPMS sensors are fitted to cars each year. The vast majority of this takes place in the US where legislation mandating TPMS sensor fitment in new vehicles (the so-called TREAD act) has been in place since 2007. The next largest destination for OE TPMS sensors is said to be Europe, but this is still some way behind the US. However next year OE sensor shipments to Europe are expected to double, before doubling again in 2014 and again in 2015. In three years time European OE demand for TPMS sensors is expected to total around 80 million units plus on its own, a point at which long term predictions expect it will level off. By this stage European market sales will have overtaken the US as the largest destination of TPMS sensors. 

However with a Korean mandate for the inclusion of TPMS in new vehicles starting in 2013 and with further legislation expected to be in place in Japan and China by 2018, there is every indication that these production bases will then overtake Europe as the largest single market. Whatever happens over the next five or six years, TPMS sensor sales are widely expected to be heading north at a rate of knots and the total global demand for OE sensors is expected to roughly quadruple during this period.

The winter driver

In Europe, as well as legislation, there are also the added effects of seasonality. The expectation is that, with most cars coming with TPMS as standard, those buying a full set of winter wheels will also be purchasing the appropriate TPMS sensors and valves to go with them. Of course this principle has the most marked effect in countries like Sweden and other Nordic markets where virtually all drivers have a separate set of winter wheels. The situation in countries such as Germany, which due to years of development and more recently legislation has a strong winter market, are more complex. More than half of the tyres sold each year may be winter tyres, but only half of these consumers opt for a separate set of winter wheels at the moment. Take up is expected to increase to around 70 per cent by 2016, bringing TPMS sensor sales up with them. 

The same, however, cannot be said for markets where a) winter tyres are not mandatory and b) where the proportion of winter tyre users opting for winter wheels is low. In markets like this (of which the UK is arguably a prime example) legislation is likely to remain the key driver of TPMS sales. But as we have seen, according to manufacturers like Schrader, the growth potential is huge.

Manufacturing growth

All this requires the leading players (which includes companies like Beru, Continental, Shanghai Baolong and others as well as Schrader) to have both large current production capacities and large-scale expansion plans. This is particularly true at the top of the ladder where current direct sensor market leader Schrader, whose business reportedly occupies in excess of 50 per cent of the market, has to increase its output more than smaller players if it wishes to maintain such high level of market share.

Schrader currently runs three manufacturing plants. Two are in Northern Ireland (Antrim and Carrickfergus), with one more in Springfield, Missouri, USA. Throughout this year the company has run seven TPMS production lines with a total capacity of 40 million sensors annually, plus two TPMS receiver manufacturing lines constructing 1.2 million units a year.

Basically the company is planning to double its manufacturing footprint during the course of the next three to five years. The most recent expansion phase began with the installation of line nine in Springfield earlier in 2012, however company representatives make it clear that there is room to expand all three of its plants as the business heads towards it goal of doubling current output of 40 million sensors a year to 80 million units annually by 2017. However on top of all this, the company has announced that it has plans in place for an additional fourth production plant in China scheduled to open in 2014, which is likely to supply the predicted Asian TPMS boom. While initially Schrader Electronics’ sensor and receiver production plants served various international markets, production output is increasingly focused on the continent in which the factory is situated. Now that production at the firm’s Springfield US plant is ramping up, the company’s largest operation in Antrim, Northern Ireland is phasing out its North American supply and is rather adding new lines for increased European market supply.