Light Vehicle Tyres

The tyre industry is the largest single rubber manufacturing industry in the world. The high performance demanded of tyres has led to extensive research and development in this field and constant innovation. This report takes an overview of the latest technology combined with the market situation worldwide. Three large companies - Bridgestone, Goodyear and Michelin - now dominate the world tyre market with a share of about 56 per cent. There then follow four mid-sized companies, which have about 18 per cent of the world market-Continental. Sumitomo, Pirelli and Yokohama - with a combined share of 17.6 per cent. In total eleven companies account for 81.6 per cent of the world market. Even though the largest companies have a turnover well in excess of USD10bn, they remain largely specialist tyre manufacturers. Many of the smaller companies also concentrate almost exclusively on tyres. However, the medium-sized companies are diversifying away from tyre manufacturing. Unusually, if not uniquely in the automotive components industry, the tyre manufacturers only sell a minority of their output to OEMs. component is the size of the replacement market or aftermarket - three-quarters of road tyres are sold as replacement tyres and only one-quarter as original equipment. The big three tyre manufacturers dominate the OE market, but other large regional players also have a share, particularly in Europe. Worldwide, the replacement tyre market for light vehicles represents about 714m tyres. The replacement tyre market is certainly more profitable for the tyre manufacturers but it has distinct problems. The general problems of slow growth and market maturity are exacerbated by cyclical growth in supply to OEMs. Despite the poor profitability of sales to OE customers and even though the replacement market represents over 70 per cent of the passenger car tyre industry's sales, tyre makers' profitability is also cyclical. The replacement market is a relatively profitable sector of the overall tyre market, but it cannot compensate for the vagaries of the OE market. A traditional indication of market maturity is continual pricing pressure in the market. small competitors to keep continual pressure on prices. In broad terms a tyre which cost USD69.90 in 1979 sold for USD41.02 in 2003. The major companies within the tyre industry are all constrained by the laws of economics and subject to similar commercial pressures. In very broad terms the cost of tyre manufacture breaks into three raw materials; labour; and fixed costs. The tyre industry has high fixed costs, making it extremely difficult to improve returns unless costs are cut or market share gained. Raw materials typically represent 25 per cent of the selling price of a car tyre. Labour costs represent about 30 per cent of sales and this has led to a move for manufacture in lower labour cost countries. This has been helped by relatively low transportation costs for the inter-regional movement of tyres - about USD1-2 for a passenger tyre. In the last decade all manufacturers have tried to increase productivity in existing o0perations in order to become low-cost producers. The continuing drive for improved productivity has resulted in excess capacity in many areas and product sectors. than demand. There is a close relationship between aggregate supply and profitability for individual tyre companies. As a result there have been gradual moves towards consolidation. Before 1985 a dozen large companies dominated the world tyre market, but after a rapid series of mergers and acquisitions, seven companies emerged with three-quarters of the market.