Deldo: Improved budget tyres an alternative for cash-strapped motorists

To put the weirdness of 2022 into perspective, consider that tyre wholesalers must contend with the impact of both rising costs and falling costs. And this contradictory situation is but one of a host of challenges in a year that tore up the rulebook. Antwerp-based wholesaler Deldo recently shared its experiences with us.

When asked to gaze into his wholesaler’s crystal ball, sales and organisation director Tom van Dyck remarks that “nobody within the tyre industry knows what to expect” in the coming months. An unsurprising response given the cocktail of events now shaping our lives, but frustrating for anyone attempting to interpret the effect these events will have on the market. Only one thing seems certain – European consumers will be more careful with their money going forwards.

Deldo emerged from 2021 with its warehouses emptier than at any time in the past 15 or 20 years, and the wholesaler worked hard to build up stocks of premium, mid-range and budget tyres during the early months of this year. No easy task when placing orders in China, but Deldo’s size and long-term relationships with manufacturers worked to its advantage. “We made certain the factories produced enough, even if they were only able to send half these tyres,” comments van Dyck. “What we received wasn’t always as much as we wanted.”

Shift towards value, budget brands

Despite negotiating well with shipping companies and obtaining competitive prices from manufacturers thanks to the large orders placed, landed prices for tyres rose considerably for all segments. This was especially bad news for premium or ‘A’ segment tyres, which in 2022 find themselves pushed beyond some consumers’ purchasing pain thresholds. “Mid-range ‘B’ and budget ‘C’ segment tyres have been the winners,” van Dyck confirms. “The super-rich will still be able to afford everything, but many others are currently reconsidering how much money they can spend on tyres. We anticipate that private consumers will increasingly move from A to B and also to C brands. Deldo is king in the low-cost segment, and we may profit from this development.”

Compared with a year ago, it now costs Deldo 30 to 35 per cent more on average to purchase budget tyres in China and have them delivered to its warehouses in Antwerp, an increase typical of that faced by every distributor. Suppliers have been compelled to adjust their prices accordingly.

Heavy winter good for business

Sell-in eventually reached a healthy level by mid-2022, and van Dyck reports “really good volumes and sales figures.” But around June Deldo witnessed a weakening of the market and sell-out has been poor these past few months. “Many in the business have well-stocked warehouses, but the question now revolves around what will happen if the market remains weak. Prices will come under pressure.”

Tom van Dyck doesn’t enjoy telling us that Deldo’s great hope for 2022 is the very scenario that millions of Europeans dread: “Even though it will be awful for the population, only a heavy winter will be good for us in regards to volumes and profits. We won’t have a great year if the winter is mild, and the coming four months will be decisive for 2022. The winter tyre business is always weather-dependent, but success this year will be even more weather dependent than usual. Without an extreme winter, 2022/23 will not be a good year for most companies.”

Cheaper shipping, overpriced tyres

Deldo’s director of sales and organisation comments that although the wholesaler was able to obtain good conditions from its sea freight partners, the need for stocks compelled it to ship products “no matter how much it cost.” This has led to the quandary hinted to earlier – if shipping costs continue to rise, products will become even more expensive and consumers will make fewer purchases, but if these costs fall, wholesalers such as Deldo may be left with tyres that can’t be sold at a profit.

“Prices have been adjusted to reflect the higher shipping costs, but freight costs are now beginning to decrease,” van Dyck observes, confirming the 50 per cent year-on-year drop in shipping costs recently reported by the Shanghai Containerized Freight Index. He illustrates a hypothetical situation in which a shipment of tyres that cost 10,000 euros earlier in the year comes down in cost to just 2,000 euros: “I would have 1,500 tyres that cost me seven or eight euros too much per tyre.” Deldo’s partners report that their warehouses are well stocked, and this is a concern as the tyres in these warehouses may become too expensive. “Therefore, we must sell these tyres soon. Decreasing freight costs are a good thing, but they shouldn’t sink too quickly.”

Deldo has been able to obtain good conditions from its sea freight partners (Photo: Tyrepress / Stephen Goodchild)

EV tyres coming

Budget segment brands are Deldo’s “children,” says Tom van Dyck, and the wholesaler continues to invest in Atlas, Fortuna, Imperial, Minerva, Superia and Tristar. Deldo has offered some of these brands for decades now and points to considerable investments in R&D and quality. “While budget tyres from Asia weren’t the best 25 years ago, they’re very much okay these days, and when looking at price-performance ratio they’re the best tyres in the market. They have very much improved over the years. With end consumers now re-evaluating what they can and cannot afford, perhaps more people will realise this.”

Deldo doesn’t have any major product launch announcements to make but is nonetheless investing in new patterns and sizes (van Dyck tells us that the Minerva range now contains some 700 SKUs), as well as in overall quality. Something we can look forward to later are tyres specifically developed for electric cars. Van Dyck shares that Deldo has been speaking with one of its manufacturing partners about developing such a product. “We’ve discussed key dimensions with correct load and speed indices, this project is in an advanced stage of planning and now concrete confirmed.”

Long-term business health

As already touched upon, what wholesalers experience in 2023 depends a lot on this year and upon the consequences of events that are still unfolding. The team at Deldo are aware that cost savings are the order of the day, both for motorists and for wholesalers themselves, but nonetheless continue to invest in product quality and also in strengthening long-term relationships with partners.

Although sizeable enough to distance itself from the consolidation occurring amongst smaller and mid-sized tyre wholesalers in Europe, with some 8 million tyres sold last year the company isn’t the largest player in the market. But as Tom van Dyck comments, being the big guy has never been Deldo’s aim. Instead, what the wholesaler strives for is a healthy business long-term – and with its 50th anniversary just around the corner in 2023, this is a goal it cherishes more than ever. “We will continue to target obtain the best prices and also the best availability,” van Dyck concludes.