GfK: UK tyre market down, but improving

However depressed the market feels to suppliers and despite the legitimate complaints of tough times from the retail sector, the overall UK tyre replacement sales situation in terms of unit sales is actually getting marginally better. According to the latest passenger car tyre sell-out sales data for the first nine months of 2012, compiled by leading international market research firm GfK, things are far from rosy, but there is light at the end of the tunnel.

Let’s take a closer look, put this into context and see what this might mean for 2013. But first some terms. When looking at a rolling 12 month period, GfK refers to it as a Moving Annual Total or MAT.  When comparing two rolling years, it is simply two MATs. When looking at a year-to-date figure, such as the January to September period we are focusing on, this is referred to as a YTD. When comparing two year-to-date figures it’s 2 YTD.

Now we are all speaking the same language, here are the company’s most up to date observations. Comparing the latest two moving annual totals, we see a market that is 3.7 per cent down. However, when we compare the latest two YTD figures up to September 2012, the situation looks brighter and the market is a better 2.6 per cent down. “I expect to see us finish the year around 2.5 per cent down on 2011,” GfK account director Kevin Glynn told Tyres & Accessories.

LCV segment and budget tyre sales up

Looking closer it is clear to see that different segments are performing differently, with light commercial vehicle  (LCV) tyres turning out to be the most positive segment for sales growth. Here we see growth of 6 per cent, comparing the latest 2 YTD figures. However, GfK representatives warned that “this may be looking at the market through rose tinted glasses because 2011 was very poor for LCV sales.” However, growth is still growth and LCV tyres is currently the second largest segment in the market holding an 8.5 per cent share in the latest YTD total. This is compared to a 5.3 per cent share for 4×4, with the balance of 86.2 per cent reflecting the continued dominance of passenger car tyres in terms of volume share.

In order to further analyse market trends, GfK currently divides the market into three tiers – premium, value and budget (see table for more specific details). The market share of what GfK terms value brand sales have nominally dipped in volume share so far in 2012, but budget brands have reportedly gained 3.4 per cent share by holding 38.3 per cent volume share in the latest moving annual total. Once again, as has been highlighted throughout the credit crunch and recession period of the last few years, this appears to highlight a kind of de-segmentation in the market. Cash strapped consumers once again appear to be choosing the cheapest tyres on offer.

Of course what this does not take into account is the effect of tyre labelling, which was only made mandatory on 1 November. As the data cited here only looks at the period up until the end of September 2012, we will have to wait until at least the end of the calendar year to have any idea of what effect this is happening. And due to the relatively new nature of this legislation and the relatively slow implementation of it in some sections of the market, it could be the end of the first quarter before we have a real feel for what effect this has on sell-out sales.

Winter tyre sales better than expected

“Everyone I spoke to during the autumn of 2011 was gearing up for a cold weather sales campaign. Given that winter 2011 – 2012 was in the event incredibly mild, the sales results are surprising,” Kevin Glynn told T&A, highlighting that the very fact that the market was gearing up for large volume sales led to “very large growth” in this fledgling UK market.

Looking at a four month period between November 2010 and February 2011 compared with November 2011 and February 2012, GfK’s data shows that the winter tyre market grew in size by over 58 per cent. Granted, cold weather products currently form only 2.7 per cent of the market, but this represents a significant increase on the historic “less than 1 per cent” figure that was bandied about for many years. The figure also brings with it the hint of an opportunity; if your business is not involved in this part of the market there is no way that it can benefit from the growth observed.

Focusing in on this sector, the largest growth area for winter tyres was – again – light commercial vehicles. This sector saw unit volumes grow from a 10 per cent share to a 12 per cent share by volume.  4×4 tyre sales occupied 9 per cent volume market share, and passenger car tyres hold the balance of the market – that is 79 per cent share by volume. Just under than 75 per cent of winter tyre sales occurred between October and January during the winter 2011 – 2012 period.

How GfK came to these conclusions

The GfK tyres report measures sales of passenger car tyres, 4×4 tyres and light commercial vehicle tyres. Sales from Northern Ireland, motorcycle tyres, truck tyres, part-worn tyres, racing tyres, specialist tyres for historic vehicles and tyres for temporary use spare wheels are not included in the coverage.

As far as sales channels are concerned, the report only covers specialist tyre resellers. Sales from franchised or non-franchised car dealerships often referred to as the VMA channel are not therefore included. Equally sales from MOT and independent vehicle servicing agents are not included. Furthermore, internet sales from dealers that do not have retail premises are not covered. These are instead referred to as “pure player” internet dealers, with well-known business Black Circles being a good example.

All these considered, GfK estimates that it covers 63 – 66 per cent of the theoretical total tyre market.

As far as methodology is concerned, it suffices to say that every week GfK receives the sales data from over 1,850 individual retail outlets. This is then extrapolated to represent those dealers which GfK does not receive data from. According to the company, the result is a fact-based report showing sales of the entire tyre specialist market.