Tyre labelling requirements, which come into effect across Europe later in 2012, will have a number of significant impacts, some of which may be unintended.
The regulation, which has posed big challenges to new tyre manufacturers, requires that new tyres should carry performance data in respect of noise, wet grip or rolling resistance (fuel economy).
There is a further huge challenge for retailers in that it is a requirement of this new law that the consumer’s choice of replacement tyre must be properly informed at the point of sale. In other words, when choosing between one brand and another, the retailer will be required to show the customer each product’s performance data in each of these performance categories. Once a choice has been made, a copy of the data for the brand purchased must be given to the customer. Whether this will actually happen each and every time is anyone’s guess, but the law will say it should.
The practicalities of tyre labelling have been discussed on more than one occasion in these columns already; but what is becoming clear is the extent to which this particular new regulation may upset a few marketing applecarts.
Europe’s tyre manufacturers have tended to view labelling not just as a technical challenge but as a marketing opportunity for themselves. The expectation was that they would achieve significantly higher performance ratings than those scores of imported brands now streaming into the EU markets — in particular from China! In practice, things may not play out quite like that.
As I have explained before, Europe’s car tyre marketplace divides into broad categories — budget, mid-market and premium. This market straight-jacket is hard to shake off. Once classed as a ‘budget’ product, for example, it is not easy to break out of this categorisation however good the product may be. The introduction of mandatory labelling may change all of that. The fact is that a surprising number of these humble lesser brands look like they will score surprisingly well in all three categories and that was just not supposed to happen. Upward brand mobility may suddenly be much easier to achieve.
This is even better news for the consumer because it means that the range of brand choices will be much wider than expected and that the perception of premium performance will not just be the prerogative of our traditional major brands.
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God vs. Mammon
A few decades back the weekly ritual of washing the family car was commonplace almost everywhere as that most-prized of family possessions was rinsed and burnished for the week to come.
It happens less now; the family car (or cars) is no longer the icon it once was and people have much less spare time. The automatic car wash is an all too easy option. The practice has not died out, completely, however, and according to Kwik-Fit, the UK’s
largest tyre retailer, still beats religion when it comes to favoured week-end activity.
In a rather irreverent piece of research, Kwik-Fit has discovered that we are still more likely to be found kneeling to wash the family Ford or VW than kneeling in prayer. The survey went on to reveal that Britons are almost three times more likely to look after the needs of their vehicles than attend to their own spiritual ones.
In a weird twist, the survey went on to discover that those people who did devote time to their religion (in this case, Church) were the least likely to clean or attend to their cars. Dubbed ‘vehicle heathens’ by Kwik-Fit, the company is urging them to match their spiritual awareness with a greater concern for their own safety on the road.
Another boost for budget brands?
Europe’s economic difficulties are likely to provide another boost for the so-called budget tyre sector.
As unemployment rises, disposable incomes shrink and the cost of motoring continues its inexorable rise, the consumer will be forced to look for better value products. The advent of tyre labelling will facilitate this inevitable trend because it will enable purchasers of tyres to make a much more informed choice than has been the case until now. With new tyre sales levels already sagging in many European markets as consumers hold back on purchases, we may witness quite a seismic change in the market mix.
The ’shape shifting’ tyre
Still in the realms of science fiction as far as we humans are concerned, but not so far-fetched when it comes to tyres it seems.
A concept tyre designed for the vehicle which will eventually replace the iconic Land Rover can actually ‘grow’ spikes to improve traction in rough or icy conditions. Designed by Pirelli this new tyre uses air pressure to inflate a secondary chamber within the tyre which in turn fills pods moulded into the tyre and these push out the spikes when they are needed. It sounds complicated and probably is, but nevertheless this is a clever idea which shows yet again how the first pneumatic tyres developed well over a century ago continue to evolve. Whether or not this particular product would be robust enough to the kind of rough-going this vehicle is designed for remains to be seen. If it proves to have a future it may be that will be on more everyday vehicles.
The current upheavals in the European and North American financial markets may well have some consequences for our major tyre manufacturers.
The on-going crises are affecting almost every sector of our economies, our banks, stock markets and our currencies. The US dollar is weak and the future of the Eurozone is in question. What is more, stock prices have plummeted. Between July and August 2011, some of our big names saw their market capitalization fall by between 20% and 40%. Perhaps those who do have cash may think now is a good time to buy.
Redressing the balance
Rising labour costs in China, combined with weak currencies and improving competitiveness in Europe and N. America, are raising hopes that the West’s long-term manufacturing decline may be slowing. These hopes are particularly strong in
N. America where the term ‘re-shoring’ has been coined to voice the expected reversal of a very long-term trend. It could happen in Europe too.
In the US where optimism is the greatest, the rubber and plastics sector is one that has been cited as a candidate for what is also referred to as ‘jobs repatriation’.
In the case of tyres, there is now high export momentum from China’s producers and although wages there are rising significantly, so too is productivity. Another factor is the anti-dumping duties on tyres which make the challenge for the US producers look easier than it really is. Remove that 30+% featherbedding and the US producers still have a very long way to go to even begin to rival China’s cost base.
Paradoxically, it may be in Europe where
‘re-shoring’ has greater impact. Newer members of the EU, such as the former Communist States to the East like Poland, Bulgaria and Romania, still have lower production costs and, of course, benefit from already being with the EU.