News, Opinions and Discussion
Tyre Neglect: Don’t Let it Happen to You
Your tyres are the only the connection you have with the road. You might be thinking, “Doesn’t everyone know that?” and you’re not wrong. Yet, despite this common knowledge amongst drivers, most auto owners across the world delay or neglect their maintenance altogether. That negligence can be the difference between making it home safely after work and crashing into a guardrail on the highway. When’s the last time you checked your tyres?
According to TyreSafe’s 2015 Tyre Safety Month study, 65% of UK drivers need to check their treads more often. In other words, a majority of tyre owners are neglecting their safety and endangering the lives of other drivers. TyreSafe’s study painted a frightening image of UK roads with over a quarter of tyres (27.3%) having an illegal tread depth of 1.6mm or less. That’s 10 million tyres in 2015 alone! If that didn’t catch your attention, maybe the penalty will. In the UK, you could face a £2500 fine and three penalty points for each illegal tyre on your vehicle! Imagine how much you could have saved when comparing the price of new tyres against a potential £10000 fine.
Let’s pretend that wasn’t enough to convince you and move on to some other facts.
If you aren’t actively maintaining your tyres, expect to see a decline in your vehicle’s braking, cornering and gas mileage while your CO2 emissions go up. Just think, neglecting your tyres affects everyone’s safety, your wallet and the environment in one fell swoop! Even a tyre that looks safe could be worn beyond its use. And unless you are driving a mega-horsepower racecar on dry surfaces, you shouldn’t be driving on less than recommended tread. A tyre with even half its tread can be a massive liability on the road.
A Consumer Reports study found that, “tread can give up a significant amount of grip when it’s still at the halfway point.” That should be worrisome enough for drivers. However, some–whether their reasoning be cost, procrastination or something else–drive their tyres to the point they are “bald”, or lack any tread. This is incredibly dangerous. Bald tyres massively increase your risk of an accident on any conditions, especially wet roads. When your tyres lack the ability to channel water from beneath its tread, the vehicle is likely to hydroplane, where the car skims the water surface and can no longer work with the steering wheel.
Another study, this one from the Japan Automobile Tire Manufacturers Association, found that a vehicle going 80 km/h can expect a 10 metre breaking difference on wet surfaces when using worn tyres. That’s about two car-lengths, or the difference between breaking in time and slamming into the car in front of you.
To avoid these dangers, make sure to check your tyres at least once a month. This doesn’t mean a quick glance at your tyres or relying on your car’s TPMS (tyre pressure monitoring system) either. If you aren’t sure how to do it, follow Highways England ACT safety plan. It shows you how to use a 20p to safely determine if your tyres meet the 1.6mm or higher mark for legal tyres in the UK. If you’re still not sure, be sure to consult your tyre professional.
When it comes to purchasing and outfitting your vehicle, not all tyres are alike. Depending on your location in the world, you may require tyres for certain seasons. In certain European countries if you don’t change to winter tyres by a certain date it is illegal and even invalidates your insurance on the car.
Anyhow this may seem obvious to most car enthusiasts and other drivers, but there remains a large number out on the world’s roads that have not put these steps into action. If you or someone you know falls into this category, do yourself a favor and reconsider the importance you place on auto maintenance. It very well could save your wallet, your life and the life of others on the road.
So, what are you waiting for? Go check your tyres!
The Future is Asia. The Future is Economy.
For the first 1700 years the two largest economies of the world were always those of India and China. The last three centuries of Western domination of world history have therefore been a major historical aberration. All historical aberrations shouldcome to a natural end. As such it is now the turn of Asia, and in particular India and China, to take their rightful place on the World economic stage. These economies have been observing and analyzing (lengjing guancha as Deng Xiaoping -China’s erstwhile leader – advised ) patiently and now have understood how to better implement the so-called pillar of Western Wisdom – the free market economy.
Amazingly, while the belief in the virtue of free trade is diminishing amongst the populations of Europe and America, it is increasing in Asia. This is why the largest Free Trade Agreements (FTAs) are now being signed and implemented in Asia,including the ASEAN-China FTA and the ASEAN-India FTA. The fastest growingtrade flows are also in Asia. In our industry like in many others, Europe and America are focussing on legislation and tyre labelling laws to act as quasi trade barriers rather than encouraging free trade. Before we get on to discussing this further let me tell you a little bit more of what is happening in Asia and how that will affect tyre labelling. As you all know in our industry the major investments in factories are being placed in India and China. Just look at the investment Michelin alone has made in India. Every global player of any substance has a manufacturing presence in China already. In fact China has already generated a top ten world player in our industry – Hangzhou Zhongce. I am sure by 2025 we will have an Indian player in the top rankings as well. The shift in power to Asia is therefore here and I am sure willover time be irreversible.
The world is going to be a completely different place in 2025. For example, people will be saying then that to visit a city of past, go to London; to visit a city of the present, go to Dubai; and to visit cities of the future, go to Shanghai or Mumbai. The most optimistic young people will not be found in the West. Instead, they will be found in India or China. Neither Europe nor America will be in a position to impose unilateral trade or economic sanctions on the rest of the world. Instead, both will work hard to create stronger ties to Asia to protect their long-terminterests in a world where the West represents a tiny percentage of the world’s total population. By 2025, there will be no doubt that the 21st century will be the Asian century. So how does this affect us in the tyre industry and in particular tyre labelling.
Well over the last few years the trend that has been really motoring along in the tyre industry is the emergence of Economy brands and the increase in both the quality and quantity of their production. Where are all these tyres made? Asia. So an Asian Century will also mean the century of the Economy brands. This is good for the industry as There are NO Bad tyres – All Tyres are good – Some are just better.
Today the number 10 factory in the world is HangZhou Zhongce Rubber Company in China. This is a factory that is commonly associated with building Budget or Economy brands such as Westlake. But today it is ahead of more ‘legacy’ brands; Infact few people know that in terms of Truck Radial Capacity it is the fourth largest producer of truck radial tyres in the world. A factory cannot get to this level of being a world class producer without being a quality producer – not in our industry anyway! If you then go down the list of the next ten producers there are again more producers of budget or economy brands. In fact legacy brands are actually also making their tyres in the Hangzhou factory and many others in China.
Over the last few years the quality of the factories have improved tremendously. All the factories are buying latest equipment from Europe and the USA to expand their lines and a lot of the equipment manufacturers for tyre making equipment have also set up shop in East Asia to cater to their demand. When one sees the shining brand new factories in China one can see why with their new equipment and new moulds and presses they can easily produce a better quality tyre than the legacy brands. I personally visit Chinese factories over seven times a year and the marked quality of improvement I have seen in these factories is rather commendable. This is not only in the major economy brand manufacturers but also in those that were previously classified as the second tier of these budget manufacturers. These factories are investing in the latest testing equipment to ensure that their tyres conform to the various standards in all the countries in the world that they are marketing to. They are also investing in quality people and ensuring that they start conducting Research and Development in house. Gone are the days of what people assumed was just copying the legacy brands. These factories are now developing in house talent with numerous engineers dedicated to developing the latest patterns and ensuring tyre safety.
Infact now in Europe the Economy brands really are taking a large piece of the pieso much so that the legacy brands seem to be fighting back through increased regulation. The economy brands are in a growing market and are doing this by eating the market share of the declining legacy brands. Currently 52% of the tyres sold in the UK are Economy brands and that is only increasing.. In France that is 28%, Spain 20%, Italy 20% and Germany 20% in Summer and 10% in Winter. But the growth in the economy segment is over 20% a year. This compared with a decrease on the legacy brands in many segments. In Europe as a whole the numberof tyres sold is just above 350 million tyres. So if Europe went the way of the UK about 175 million tyres sold in Europe could be budget tyres! Now that is a growing market! And that is a scary prospect to Legacy manufacturers – hence the increased regulation being lobbied for.
The first of these was to introduce the Clean Oil / REACH / PAH Regulations. Some say that this regulation has had little effect on the environment but that is a whole other debate. But what this has meant is that the economy brand manufacturers have had to set up separate lines of production using different ingredients especially made for Europe. This has increased their costs and reduced their efficiency. The legacy brands thought this would halt the increase of the Economy brands in Europe. Although there were some initial adjustments most of the manufacturers have managed to ensure that their tyres are Reach compliant.
The reason that I mention this is that the same is with the Tyre Labelling Laws – I believe that it is really just an increased trade barrier to curb the growth of Economy brands into Europe. The legacy brands were hoping that this will show consumers that their tyres are better than the Economy brands and as such they should pay more for them. In fact what has happened is that the major economy brands have been working hard, including changing many moulds and patterns to ensure that they will hit the levels close to the major legacy brands in this segment. Infact I believe that this tyre labelling regulation in the EU will allow economy brands to increase their presence in the EU Market and perhaps even increase their price. As brands will become less important at the retailer, especially in markets like the UK which don’t have a strong local producer, people will prefer to buy the cheaper tyre if the grades are the same. In fact the major beneficiaries will be the premium budget brands like Infinity and Westlake which will now be able to justify their premiums over their lower priced competitors. Economy brands have reached C and C and some patterns they are B as well. Where they have not reached this yet I have personally seen the plans in place to get this in place in a short time. Some of the major brand patterns have not reached beyond C and C yet and are selling tyres with C and E as well.
For example research has shown that the most expensive example of one popular tyre size (195/65 R15) for a Volkswagen Golf 1.6 TDi is about 120 per cent the price of the least expensive. The spread of prices is further evidenced by the fact that the most expensive tyre is around 60 per cent greater than the median price. Much of the talk pre labeling centered on how established brands could use the initiative to justify their higher price – in extreme cases, well over double the price – over those tyres coming from emerging markets. It seems clear now that if you have Asian tyres at C C and premium tyres at C C then it becomes difficult to justify such a premium.
So will the performance reassurances provided by the label on budget tyres force more expensive mid-range and premium brands to discount? I believe that manufacturers with large sales of V and lower-speed rated tyres are the most opento price pressure resulting from labeling. Put Simply, consumers who drive more expensive cars will be less likely to consider price as a more important factor in making their tyre purchase. Hence my cut off on V and lower speed ratings. Analysis of the market, done by Infinity Tyres, suggests that Michelin and Continental are of the top five manufacturers most active in this category, with 70 and 65 per cent of consumer tyre sales coming from this segment. The analysts reason that should economy brands’ rankings be able to challenge the quality levels perceived by the consumer Michelin would have the most to lose. Conti has some protection because it has more exposure to the Winter markets in Germany.
So is it all doom and gloom for the Legacy manufacturers? Not at all! I do believe that the labeling regulations will primarily be focussed on the consumer choice aspect rather than the premium Original Equipment manufacturers. I think that the original equipment fitments on premium cars are more or less exclusively the preserve of premium tyres. And just to be clear whilst Hankook is an Asian player I think that they are firmly established as a premium player today. In addition to conformity of brand equity between car and tyre, one major reason for this is the rigor of testing and the far larger number of performance indicators – other than wet grip and rolling resistance – generally used for determining a tyre’s suitability for premium OE fitment.
To take an extreme example, Michelin’s 225/40R 18 Pilot Alpin PA4 tyre was granted N-specification by Porsche, meaning it had to clear a high performance bar in dry handling and braking, longevity, hydroplaning, internal noise, and many more in addition to fuel efficiency and wet grip. On the tyre label, this tyre is awarded EC. More than one Asian manufacturer of budget tyres has comparably sized tyres that equalled and surpassed this rating.
Anyhow I would like to leave you with one final point on why I think that Labelling regulation is tantamount to trade barriers against Asian Manufacturers and that is The Largest Tyre Manufacturer in the world by units, based in Europe, is exempt from all tyre labelling regulations. That is LEGO!
Are We Witnessing ‘Generational Change’?
The incredible rise of the Chinese tyre industry has been the major phenomenon within our business over the past decade. Rather than seeking major overseas acquisitions, the Chinese have steadily arrived on the global stage through organic growth and via impressive investment in new factories and state-of-the-art capital equipment. Enterprises like Hangzhou Zhongce and Shandong Linglong are now not only well established as domestic forces but are becoming increasingly global tyre players.
It’s a commonly held belief that the Chinese tyre industry is export-led. But an incredible 24% of all global car production now takes place in China – so it’s logical why so many tyres are also being built there – primarily to satisfy the new ‘first generation’ Chinese drivers. As the domestic vehicle market expands, so more and more tyres are needed – both for OE and replacement. It’s also worth noting that the Chinese currently own 80 vehicles per 1,000 people – compared to more than 500 per 1,000 people in the UK – and China is already the number one car market in the world! But domestic growth is also there to support global ambitions and Chinese tyre brands are now becoming more visible worldwide, following a trend in almost every other consumer product.
Take a closer look at your mobile phone – the brand message may be ‘California’ or ‘Finland’ but it’s probably made in China. The same with your blu-ray player or laptop or 3D TV or even the wallet in you pocket. The brand is global but the production is in China.
Why China? Of course initially it was down to cost advantages but now, although input costs still play a major part, the country also offers improving quality and reliability. Just as several decades ago with its neighbour Japan or maybe later in the 1980s with Korea, China is emerging. Some fifty years ago when they first started to export to Europe, there was maybe a reluctance to buy ‘cheap Japanese’ and I remember the reactions approximately 20 years ago that Korean tyres were not perceived as good as ‘Made in USA’ or ‘Made in Europe’. That has all changed of course. The world’s leading tyre producer is Japanese and Korean tyre brands (like Hankook) are now globally respected.
So it looks to me that we are entering a new phase in the tyre industry. An era in which we will witness significant shifts – so-called a ‘generational change’. In a few years’ time the list of ‘Top 20’ tyre manufacturers could look very different to today. The European and North American tyre markets have matured. To see where change is really happening, it’s time to look further afield to where vehicle ownership is in its infancy and undergoing a rapid transformation and to consider how this, in turn, will influence the supply of new tyres and new tyre names across the globe. It’s an exciting change to be fully embraced. A change that can only help to deliver better choice, better quality and more buying power in the hands of you – the local tyre dealer.
‘Made in China’ Can Also be a Mark of Quality
This isn’t a surprise if you’ve been fortunate to visit the Far East. I say fortunate in that amongst the incessant construction growth, let’s not forget that China is still home to some of the most remarkable places on the planet. I’ve been awe-struck by such sights as those along the Yangtze River, the views from up high on the Great Wall and the serene beauty of the West Lake in Hangzhou. But amongst this beauty it’s hard not to be affected by the incessant smog that hovers over most of China’s most industrialised areas (including the capital Beijing and the heart of ‘tyre land’ in Qingdao or Shandong province).
It’s got so bad recently that Chinese authorities now authorise pilots to ‘fly blind’ in poor visibility to reduce the long delays caused by the smog. Fewer than one in five flights leaves on time from Beijing Capital Airport, according to travel industry data – the worst delay record of any international airport. Air pollution in Beijing regularly hits very high levels and atmospheric particles have been recorded at a staggering 755 micrograms per cubic litre – 38 times the level recommended by the World Health Organisation. Pollution levels can hover around 400 micrograms in Shanghai and Beijing, posing serious long-term risk of cancer and lung diseases to over 30 million inhabitants of these two sprawling cities.
But before we shake our heads and complain of global environmental catastrophe, we must also remember that China is going through industrial ‘adolescence’, just as every other major economy has done before. We in the West still want our cheap toys and our cheap tyres. To provide these to us China has had to suffer the consequences of this pollution. So far be it for us to judge or condemn the Chinese for it as many in the West do.
The Chinese government is trying to change and improve its environmental record though. For example, Beijing plans to replace its oil-burning buses with 14,000 new greener models powered by electricity by 2017 to help clear the smog. Coal imports in the first quarter of 2015 were down 42% on a year earlier as tougher anti-pollution rhetoric starts to bite. “Environment pollution is a blight on people’s quality of life and a trouble that weighs on their hearts,” said Chinese premier Li Keqiang at the opening of the National People’s Congress in March 2015. “We must fight it with all our might”.
In our business, China should be applauded in that it’s already planning its own tyre label to help with these regulatory efforts. Just as many mutter that Chinese tyre companies don’t take the European label too seriously, our Asian counterparts look set to unveil a set of label regulations possibly even tougher than those over here (albeit with some striking similarities). Like the EU scheme, labels will apply to car, 4×4 and truck tyres and will include the familiar criteria of wet grip; rolling resistance and noise. It also seems that the grading differentials will be identified by the same letters (A to G scale) and noise bars.
Unlike Europe, the Chinese tyre labels will likely start on a voluntary basis during 2016, so as to help develop general consumer education into the importance of labelling. This so-called ‘transitional phase’, will become mandatory quite soon after that. Like most things involving China, the authorities haven’t been hanging around. China’s set up its tyre labelling executive in July 2014 and initial programme details were already published by March 2015. Many of the larger Chinese tyre manufacturers already have (or are most definitely planning for) tyre test facilities to rival those in the West. Not only will wet grip and noise testing become quicker and more widespread, these investments also mean several factories will be accredited to homologate rolling resistance credentials in line with European scores.
Will all this mean that Shandong province will roll back the smog? Not just yet and there is a long way to go as China needs to provide places to live, work and eat. But hand in hand with emerging tyre brands’ march up the value curve, we should also look kindly on the country’s visible commitment to pursuing ‘greener’ policies. Of course, nothing will trump the nation’s pursuit of economic growth, but now with more than one eye on environmental concerns, Chinese tyre makers not only look to match their Western counterparts on fuel efficiency, wet grip and performance, but also in the future would you also see China becoming the leader in ‘green’ tyre technology? Well the Chinese don’t do anything by halves so it certainly is possible…..
It’s now been a year since the introduction of tyre labels in the European Union and it was interesting to see the results of a recent NTDA – Lanxess survey on this topic. Despite widespread recognition within the tyre trade itself of the new label’s importance, survey results appear to demonstrate that 74% of consumer respondents highlight the tyre price as still being the most critical issue at the point of purchase.
Maybe in these difficult economic times, we shouldn’t be surprised that the driver looks at the cash in his or her pocket first before selecting a tyre. But even if “John Smith“ were to compare tyre labels before making a purchase, what should draw his eyes first? I would suggest the fuel efficiency label rating of the product as it’s the main measure which impacts on the cost of motoring over the long-term.
In this respect, many of the so-called ‘value’ tyre brands now obtain ‘C’ or even ‘B’ label grades which are actually not far away from those labels presented by ‘premium’ tyre brands. If this is the case, the tyre label reinforces the opinion that most tyres are of similar fuel-saving quality and if the option is there to buy a tyre 20%, 30% or even 50% below the ‘premium’ price level, then it’s an opportunity to be taken.
Let’s not forget that tyre labels were, in fact, originally intended to support the tyre purchase process in the same way that similar such labels now adorn white goods such as washing machines. The focus was very much on driving energy improvements – in particular to lower the vehicle’s energy absorption / rolling resistance. As the European Commission states on its own website, a typical passenger car driven 25,000km can save fuel costs of up to £200 per year by choosing the best performing tyres. Interestingly, the Commission goes on to state “as the best performing tyres will be more costly, it is in the second year that you will have net savings”. So even before the labels arrived, the ‘thinking’ was already in place that the consumer would need to spend more on buying ‘premium brand’ tyres to gain savings in the long-term.
But the results haven’t always worked out that way. In fact, many of the premium brand tyres exhibit fuel consumption grades similar to (if not even sometimes worse) than ‘mid range’ or ‘value’ competitors. In a recent UK motoring magazine tyre comparison article, the ‘value’ tyre tested actually topped the rolling resistance section of the test, performing over 25% better than some of its ‘premium’ competitors. That’s some margin!
Let’s also not lose sight of the laudable aims of the tyre label. The aim is to reduce CO2 emissions by up to 4 million tonnes by 2020 – the equivalent of removing up to 1.3 million cars from European roads per year. The end goal is ‘sustainable mobility’ and the reduction of our industry’s carbon footprint. This ‘green’ debate is one that is raging across the globe and tyre makers from the Far East have already grasped the importance of the issue. New ranges have been brought to market with a balanced goal of achieving more or less a ‘C’ grade in both rolling resistance and wet grip criteria. This differs from approaches by some tyre brands which look to maximise wet grip scores to the detriment of rolling resistance grades (E grade or lower).
Of course, the other label criteria of wet grip (and external noise) are also very important. And so too are a wide selection of other tyre tests that don’t make it onto the label – again, for sustainable mobility purposes, surely the lifetime tread wear of the tyre is a worthwhile measurement? But it seems that after the launch fireworks of 1st November 2012, the push for more fuel efficient tyres has been a bit of a damp squib. As the grading is not proving to give a real competitive advantage to some‘legacy’ brands, the media focus is being shifted steadily to the ‘wet grip’ argument. What a pity! Not only because of the original intentions of the tyre label but also, as the consumer’s friend, tyre manufacturers need to strive to deliver cost savings for the hard-pressed driver – either directly via attractive pricing, or indirectly via the communication of real long-term fuel saving tyre features.
Who’s Testing the Testers?
It’s human nature to look to a higher authority for answers to life’s many questions. I’ve just returned from a fantastic trip to India with our wonderful Infinity partners and associates where, amongst many other delights, we visited amazing temples, ancient ruins and iconic monuments – each designed to inspire and influence through the generations.
In the tyre business we can often be a cynical lot – but if there’s one thing that’s talked about in serious tones and knowing nods, it’s the ‘higher authority’ of the magazine tyre test. Nowadays there is quite a proliferation of such tests but the most recognised of them all is the German motoring organisation ADAC’s bi-annual summer/ winter ‘reifentest’. Amongst many Germans (as well as fellow Swiss and Austrian drivers) the ADAC tyre test has taken on a reputation both far and wide with manufacturers vying for a ‘highly recommended’ seal of approval. ADAC was founded over a century ago and is the largest automobile club in Europe with over 19 million members who avidly follow the magazine’s advice. The results of these tyre tests are also syndicated across Europe and beyond (for example in Which? magazine in U.K.).
However, such tests have recently come under renewed scrutiny by the introduction of the European tyre label scheme (in place now for over a year). Like the magazine tests with their often blunt ‘not recommended’ conclusions set against the ‘highly recommended’ score usually reserved for more established brands, the expectation was for a clear divergence of label results between selfproclaimed ‘premium’ brands and the lesser known newer ‘economy’ names. But if that was the thinking, it’s not quite gone to plan, with new entrant tyre brands exhibiting label results close to, or sometimes exceeding, those of better known competitors.
So, the argument goes, the label is too simplistic -there are lots of other tests that aren’t included- tread wear, aquaplaning, dry braking being just three examples. And so, the best way for the tyre buyer to find out all this important information is to read one of the many ‘consumer champion’ magazines. And this is where ADAC has stood out as the ‘King’ of tyre tests.
However, ADAC’s unexpected fallibility recently surfaced when news broke of revelations that an executive had been falsifying some voting results in its annual ‘Yellow Angel’ (Car of the Year) award. Instead of totalling 34,000 votes, the winning VW Golf actually only received 3,400 member scores. Although this has been described as an isolated occurrence, even Germany’s Transport Minister has stated that the organisation must “lay all the cards on the table”.
Admitting that the organisation has its work cut out to repair trust, ADAC’s Managing Director can’t have been pleased to subsequently hear that concerns have now spread to the organisation’s ‘Reifentest’. Firstly, a former design engineer of a European tyre manufacturer was quoted in the ‘Servicezeit’ consumer TV show on German channel WDR as saying that special sets of tyres were prepared for magazine tests that had nothing to do with the tyres actually commercially available in the market. Secondly, another former employee of a ‘premium’ tyre manufacturer informed the same WDR show that scoring requirements for the ADAC test were shared in advance and positive modifications to the tyres for testing were able to be made thereafter.
And the story keeps on going. In April, tyre industry veteran Mr. Willy Matzke (former head of testing at ADAC’s Austrian ‘sister’ association OAMTC), joined in with his own observations of testing over the decades.
According to Herr Matzke, there were “virtually unlimited” opportunities for manufacturers to manipulate tyre tests. From using manufacturer-owned test tracks to switching tyres mid-test to using machinery only operated by employees of tyre companies….well it’s quite incredible what is now flying out of ‘Pandora’s Box’.
So where now from here for our industry and its tyre comparisons? Well, for me personally, I certainly still support the usefulness of magazine tyre tests – any way we can get the public talking about tyres and understanding their nuances and characteristics as well as their safety value must be a good thing. And there is no doubt that ADAC has been a positive force on the German (and European) driving public over the years. So it’s a real pity we are now discussing alleged tyre test manipulation. But it’s important that we get some clarity since the playing field needs to be level for all brands and recent allegations and opinions suggest that tyre tests may have sometimes been a ‘cosy’ set-up unduly influenced by a small group of manufacturer representatives and their secretive ‘magazine test’ technical teams. Remember that in many European markets a ‘highly recommended’ tyre test result is worth its weight in gold for the short-term marketing value alone so the temptation to influence or ‘assist’ motoring magazines in any possible way must be immense.
As a long-term partner of two of China’s leading tyre producers, it also must be said that although the new EU tyre label is levelling the playing field in terms of consumer tyre brand perception and recommendation, there have been several recent occasions where Chinese-produced tyres as a homogenous group have been negatively tainted by some motoring magazine articles. So, in the light of such tyre test ‘finger pointing’, should I also now question if such articles are possibly ‘open to influence’ by those with connections who would try their hardest to keep new tyre brands (even those with first class manufacturing facilities) from gaining any foothold in the European arena?
In the next edition of ‘Talking Tread’, I’ll try to highlight some of the ways forward for our industry to ensure that magazine tests can possibly regain their complete validity in the eyes of the motoring public. Until then, I will continue to read the ever growing number of magazine tyre tests – but certainly with a new degree of scepticism.
The Economic Marvel Changes Tack
One of most important issues facing not only the tyre industry but also every industry today is the growing impact of China in the world. In this special New Year edition of Talking Tread I would like to take this opportunity to write more about China – what has it achieved and, more importantly, what is still to change in this fascinating country.
It’s quite remarkable that the Chinese nation has successfully elevated over 500 million people out of poverty in the past thirty years. It has also grown from under 5% of global GDP output to over 15% of the world’s GDP and is still on track to grow its economy at a rate of 7% per year. It’s the largest mobile phone market in the world and now consistently the largest consumer of iron, steel and cement in the world. And it has built more for its people in the last ten years than any other nation on earth.
Deng Xioaping – the ‘architect’ of reforming China – used four key words to describe how China would go about achieving this. The first two were ‘Reform’ and ‘Openness’:
China focused on reforming the economy and allowing market forces to play a much bigger role. It has done this whilst ensuring that the country has been relatively protected from big external ‘shocks’ such as the 2008 financial crisis. It also ensured that it employed the maximum opportunities afforded to it from its demographic dividend whilst many Western societies were ageing more quickly.
The next two were ‘Stability’ and ‘Consensus’. China has also tried to establish a better rule of law. Whilst there still may be some way to go in this regard, it has moved from a situation of Party opinion to a better set of codified laws now actually in use. This has also ensured effective control whilst opening up society to build enough stability. It has also ensured that there has been consensus on the most important issue facing Chinese society – the elevation of living standards. This consensus has led to a single-minded determination of the leadership to focus on growth to lift people out of poverty.
Can all this continue now that China has changed so rapidly over recent decades? There are two very important challenges that the country faces today.
Society is now ageing rapidly. China’s one child policy is catching up with it. Today the country’s ‘over 65’ population is 8%. But, by 2040, this number is forecast to be over 23%. The number is more than the population of the three largest European economies combined – all over the age of 65! This has tremendous societal pressure not only on the pension systems but on services and in particular the provision and availability of healthcare. Most importantly for us, this also signals the end of the demographic dividend and the natural associated considerable rise in labour costs. It is no wonder that the Chinese government is slowly changing its policies to allow more couples to have two children.
The actual driver of growth of the Chinese economy has fundamentally changed. In the past ten years the engine of growth has been investment for export-led growth. In the last global economic crisis, the Chinese government realized the downside of relying too much on exports. It also foresaw with the rising labour and input costs that it will have to focus on generating internal consumption. In typical Chinese fashion it has achieved this in relatively little time and, today, domestic consumption has surpassed investment for export-led growth as driver of the economy. The Chinese leadership appreciates that for this to continue that they will have to ensure higher incomes for the people – further increasing labour costs. A ruling party communique has already been issued that Chinese workers should all have double their income per capita by 2020. Economists have calculated that this will result in a 10% growth in consumption. And China has a way to go if you measure consumption as a percentage of GDP. China is still relatively low at 35% compared to the USA at 70%.
What does this mean for us in Europe? Well it certainly means that the end of the “Cheap China” era is coming. More importantly it tells us that the Chinese consumer is going to be the new ‘King’ and that we should focus more of our efforts on understanding where he will spend those increasing levels of yuan. Changes in China can be described as like a giant wave crashing on to the shoreline. It’s pointless digging in your heels to withstand the efforts and hope that life will be like before the wave came. The best way to deal with a wave is to dive right in. Those that are willing to understand these nuanced changes are in store for a ride of a lifetime!
The Proof is in the Pudding
I’m going to start this latest conversation by talking about Christmas….. in the middle of summer! Well not exactly the celebration of Christmas, but specifically the humble Christmas pudding. For those of you unaware of this traditional British delight, it’s a boiled pudding composed of dried fruits held together by egg and suet and flavoured with sweet spices. The pudding is aged for several months and the often high alcohol content prevents it from spoiling and has the added benefit of sending adults to sleep in front of a warm fire on December 25th.
Whilst it doesn’t really appeal to my taste buds, it’s a staple part of the Christmas experience to my British friends. But I digress – so where are we going with this unseasonal discussion?
Well, the Christmas pudding is sold across the land in many shops and they are sold in their millions. Last year, the venerable Good Housekeeping magazine did a taste test and here are some of the results. In first place came the offering from the German company Aldi at just £3.89 (less than 5 euros). In last place at a whopping £25 (or 30 euros) came Fortnum and Mason’s pudding – this from the shop that provides the food to Her Majesty the Queen.
In fact Aldi was the cheapest by some way and won the taste test. Fortnum and Mason was actually six times higher in price!
This is just one small example of how product brand positioning is becoming a cloudy business and the positioning of legacy brands in the minds of the end consumer built up over the past decades in the ‘Age of Marketing’ is now fast eroding. Compare the stellar passenger ratings of Easyjet with the lacklustre Iberia or Alitalia, the rise and dominance of Primark and Zara in the clothing business, the amazing JD Power scores of Toyota and Skoda and you can see that the historic linear correlation between price and quality is flexing – and may even be shattering.
Whilst we in the industry still tend to describe tyre brands through historical terms such as ‘Premium’, ‘Mid Range’ and ‘Economy’, it appears that we too are failing to understand ever-changing consumer thinking. In a recent study commissioned by marketing company INNOCEAN, it reveals that tyre brands are failing to gain traction in the minds of today’s consumers….’creating a golden opportunity for new challengers looking to shake up the market’.
Incredibly to those of us who live and breathe tyres on a daily basis, this research found that 40% of drivers have absolutely no idea what make of tyre is on their car – and 46% of consumers spend less than five minutes in the decision making process before buying new tyres.
Most interestingly for those of us who try to invest in the time and effort to develop brand equity, this survey found manufacturers are failing to communicate major selling points of their product, with many campaigns treading the same familiar ground. This results in few communications that actually stand out, with the report concluding that ‘after years of inertia in the market….there are huge opportunities for brands willing to be more targeted – and to focus on more than the usual suspects of safety and performance’.
So does this mean that we should surrender to the public’s growing perception that all tyres are simply ‘black and round’? Definitely not! What it does mean in my opinion is that when a tyre market like the U.K. now comprises over 50% ‘economy’ replacement tyres, is that it is even more important for those of us who consider ourselves ‘challengers’ to step up and memorably communicate to the driving public that even at a lower price point level, all tyres are not created equal (excuse the plug!) and that factors such as tyre labelling, tyre sourcing and tyre brand equity remain important to ensure accountability and a satisfied customer. All economy tyres are simply not the same – in tests we ourselves undertake there are ‘budget’ tyres that deliver similar results to ’premium’ tyres – and there remains a job to educate and inform the driving public that selecting and caring for tyres remains a key safety aspect of vehicle maintenance.
Just because we have a more sceptical audience does not mean the message is no longer worth delivering, it’s just that in the words of INNOCEAN, we ‘ need to think beyond Formula One billboards and calendars full of scantily clad models, and think much more carefully about the consumer journey’. Or if we don’t, never mind the puddings, it will be those who adhere to the ‘same old same old’ who will soon be the turkeys at Christmas.