Fuelling the future

A few years ago people were asking if this fuel-saving thing is ever going to catch on. Now virtually every manufacturer has a fuel-saving line and a fuel-economy strategy – we even have mandatory product labels comparing products on the basis of this characteristic.

Whereas in the early days of this message the emphasis was on the green benefits of such tyres – still a powerful approach for car and CV fleets – for the consumer replacement market, the combination of financial pressure that currently presses down on family budgets have led to consumers to think harder than ever about the overall value the get from tyres. As we saw in December’s feature reviewing 2012, no more than six per cent of retailers are current exploiting the full benefits the European tyre label offers in terms of fuel efficiency comparisons, but they are no doubt there to be had.

While this may be common to tyre retailers across Europe, there is another fuel related issue pressing the UK market in particular. A Deloitte Report ‘Study of the UK petroleum retail market’ is said to “indisputably” confirm that the majority of fuel forecourts are running with dangerously low levels of stock and that the continued closure of forecourts is reducing onsite storage capacity across the country due to pressures on working capital. Or, in other words, while fuel prices are getting higher and tax revenues through fuel is raking in more money for the exchequer, margins for petrol retailers are being squeezed so tight that they can’t afford to bring in sufficient stocks of the central product. What this means is that the chances of petrol stations running out at peak times, during holidays when deliveries are less frequent and in the event of a crisis, are that much higher. It also means that those able to guarantee supplies will charge even higher prices than they already do for the service – think of motorway service stations for example.

Commenting on the report’s findings, Brian Madderson, PRA chairman said: “Most businesses have to pay the tax within one to three days of a stock delivery before they have chance to collect the tax from their customers. Furthermore banks are reluctant to extend overdraft or loan facilities so their only option is to run their fuel storage close to empty. Why does the Government offer deferred duty arrangements to the big oil companies that are best placed to pay immediately, yet not to the small independently run forecourt?”

But what does all this mean for the tyre industry? Of course looking into the future is never easy, but looking at trends up till now the suggestion is that further fuel price increases could affect the top and the bottom of the market in opposite ways. Those requiring maximum fuel efficiency and with the cashflow to capitalise on it could end up being more inclined to pay extra for better fuel efficiency. In real terms this is big business to business customers and premium end consumers.

The majority of the car tyre replacement market however, could be pushed the other way. Ask anyone at TyreSafe or Micheldever’s Alan Baldwin (who recently “declared war” on part-worn tyres – see separate article) and they will tell you that consumers are feeling so priced out of the market that they are willing to spend out on part worn products that most of the time are non-compliant, far too frequently unsafe, and – with some being sold at 3mm for example – offer poor value for money. But why do they do it? Because after the price of the car, tax, MOT, insurance and yes fuel that is the money that they feel they have for the tyres on their car that have not yet burst but they know are approaching the legal limit.

The vast majority of tyre dealers may not sell fuel themselves, but with this in mind perhaps petrol and diesel prices are fuelling the future of tyre retail more than we might think.