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03/03/2016
LET'S HAVE IT FROM THE MANUFACTURERS

Original Equipment tires

 

Nowadays a handful of manufacturers share the entire OE tire market

Paolo Ferrini

It is the most sought after business opportunity by all tire manufacturers. Probably the most prestigious. But perhaps less economically rewarding than it might appear at first glance. Supplying tires as Original Equipment on a number of vehicles is undoubtedly a great satisfaction for any tire producer, but it involves considerable investments in terms of human, technical and economic resources. For this reason, nowadays there are no more than ten companies that can afford to split up among themselves the largest part of the market. Some are well established brands such as Bridgestone / Firestone, Continental, Goodyear / Dunlop, Michelin and Pirelli, in addition to a growing number of new entries, especially from the Far East, like Yokohama, Hankook, Kumho and Nexen.

Whatever the case, whether we are speaking of expensive supercars or small city car, supplying tires as Original Equipment remains a sort of "imprimatur" (approval) which implies the achievement of a high level of quality, almost equivalent to a certificate of reliability and advanced technology. A great result, no doubt, from an image and prestige point of view, especially when a specialized car/tire combination is involved.

 

The Golden Circle                                        

 

Supplying tires for an extremely popular and widely distributed model implies the prospect of significant production volumes and, of course, a good turnover. In addition to supplying tires to vehicle manufacturers, the opportunity of extending the business also to the aftermarket is quite legitimate. It's what marketing specialists call Golden Circle, a virtuous cycle, whereby a satisfied client should be naturally inclined to renew his or her confidence in the tire, as well as the brand, originally proposed by the car maker.

There are some exceptions, though. At times, three or four years might go by before the OE tires need replacing, and at this point the customer, who is perhaps even starting to think about replacing the car, might opt for cheaper tires.

If the time to replace the tires arrives earlier than expected, or the purchase of a new car is not quite so imminent - as it is often the case in these times of economic crisis - the tire dealer could have the last word in the choice. But this is another story. However, whatever the case may be, if a customer is convinced to replace the tires with the same original product, business opportunities for the manufacturer are bound to increase. This would be enough to justify the interest of a number of companies around the opportunities offered by supplying original equipment tires and the subsequent investments in terms of technical, human and economic resources.

 

Development partnerships                                                                        

 

Of course, before buying thousands of tires, automobile manufacturers want to be sure that the product chosen and supplied to the end customers will indeed meet their needs. This is why OE tires are subjected to extensive tests. Not only. More often than not, tires have to be adapted to the suspensions and different approval requirements for one or more vehicles. In some cases, manufacturers are obliged to issue a “limited series” tire specifically made for a particular car model.

And when finally the game seems to be over, the car builder’s purchasing department sends its representatives to negotiate the price for a given supply. In short, not everything that glitters is gold! This is why tire manufacturers should really count the costs because, true, equipping a growing number of cars as OE suppliers provides a measure of satisfaction, but it is equally important to make ends meet. Because everyone knows, turnover is one thing, profit quite another!

The choice of a specific tire for a vehicle - especially for a popular and widespread model – starts well in advance of its launch on the market and involves, simultaneously, several tire makers. Two are the requirements needed: on the one hand, a wide range of proposals to choose from, and on the other an alternative, which prevents a car manufacturer from having to rely too heavily on one supplier, if that product should suddenly no longer be available.

The selection process begins by submitting detailed specifications of the new car’s features and tire requirements. Thus, a development partnership between the car maker and tire manufacturer  takes place which, in the absence of an already existing product that meets the necessary specs, provides, among other things, a selection of the most suitable materials, laboratory tests, 3D simulations and small batches of tires to be tested ...

In the end, the most promising prototypes are pushed to their limits on a test track using, as in the case of Bridgestone, test drivers and engineers dedicated to each car brand. Thus, a technical partnership with the automobile industry is formed involving a packed exchange of information, feedback and crosschecks in order to produce the perfect tire for a specific vehicle. At this point, if all the conditions agreed upon have been successfully met, the tires are sent to the car manufacturer’s test center from where, seeing that the development of the car has continued on its own, it is quite likely that a few requests for modifications will arise, perhaps even last minute ones.

 

“For your wheels only”                                          

 

Sometimes the need to develop “special” tires suitable for a particular car arises. "For your wheels only", paraphrasing the title of a James Bond movie. This trend is deeply rooted, dating back to 1974 when Porsche, developing the first 911 Turbo, realized that the footprint of the tire was considerably deformed by the brutal power output of its 6-cylinder boxer preventing the correct transmission of power to the ground. The German manufacturer went on to request a softer casing and tailored specs around the German coupe.

Thus the "N" symbol (for "New"); a tire identical in size and tread pattern to thousands of others products of the same manufacturer, but with a different structure. A tire designed for a specific car. Over the years, the Porsche case was not the only one and today, of course, scrolling through a number of catalogs, we find tires designed for this or that model. Audi, BMW-Mini, Mercedes and Volkswagen clients, just to name a few, can identify their “special tire” looking for a star on the sidewall with markings such as “AO” (Audi Original), “MO” (Mercedes Original), “VO” (Volkswagen Original). Not to mention markings “AM” for Aston Martin, “B” for Bentley, “J” for Jaguar, “L” for Lamborghini, “LS” for Lotus and “MC” for Mc Laren.

The real differences between these “special tires” and so called "standard" models are especially difficult to be noticed by the average end user and probably many customers using them every day may hardly notice any difference. However, in critical situations - an emergency braking, an evasive maneuver or loss of traction - these may suddenly emerge allowing the driver to control the car because the tires are perfectly suited to the vehicle’s shock absorbers, chassis and electronics.

Problems, on the other hand, could arise following a possible replacement of factory-fitted tires. How many customers are aware that their car has specially made tires? And how many, perhaps even knowing this, expressly request them? And finally, how many traders even bother keeping them in stock for their customers? But this is really another story.

 

BOX

 

And now a word with the manufacturers

 

Bridgestone –The Original Equipment market is strategically important for Bridgestone in terms of research and development. In recent years, we have used a lot of resources and made many efforts in searching and developing high quality partnerships to expand our market and apply our technologies. For example, our ologic Technology, developed in partnership with BMW, exploits the synergy between a large diameter and a narrow tread design to provide high aerodynamic efficiency and low rolling resistance, without sacrificing grip.

A few months ago Bridgestone received the Volkswagen Group Award for best supplier, bestowed upon those international partners which distinguished themselves in terms of reliability and technological innovations.

 

Continental -Our group has always enjoyed several close partnerships with car manufacturers for the supply of most automotive components, as demonstrated by the different acquisitions made by Continental in the recent past. The Continental Group is a leading tire supplier and our market penetration is evident by the fact that we currently equip a third of all vehicles circulating in Europe.

The fact that tires account for about one third of the Group's total turnover has a particularly important significance as it is the only product displaying the Continental brand; the remaining part of the Group's turnover is made up by electronic components. Our choice to establish partnerships with automobile manufacturers involves a lot of research and development aimed at achieving their targets, such as, cutting edge technology, quality, safety, environmental respect and future outlook.

                                                              

Goodyear/Dunlop - The OE tires market is a key element of our strategy and this is why we have always cooperated with all major car makers. We realize that consumer loyalty is generally higher in premium models. For this, Goodyear/Dunlop’s focus is on hi-performance vehicles and SUVs. Car manufacturers – especially for premium models - require excellent products, it is therefore crucial to supply products that meet the stringent original equipment parameters.

Moreover, our partnerships with premium car manufacturers motivates us to continue investing in innovative technologies: among them you may recall the new Sound Comfort Technology, which, through a sound-absorbing polyurethane stripe, is capable of reducing a tire’s rolling noise guaranteeing a superior ride, with the same degree of comfort typical of prestigious cars such as the Mercedes S-Class or Audi A8.

We obviously design tires even for popular models that allow us, on the one hand, to reach a wider portion of the public, emphasizing, on the other, the strategic aspects, such as sustainability. An example of this is our partnership with Fiat, a group that has always focused on reducing emissions, which allows us to enhance and promote our EfficientGrip range, specifically designed to reduce rolling resistance and therefore fuel consumption, without compromising on performance.

 

Michelin -Michelin invests more than 600 million Euros every year in research and development. Part of the development process of our tires is achieved by working with motor vehicle manufacturers, who stimulate the development of our products by introducing new technologies that will inevitably have an impact on tire performance. This kind of partnership is based on an exchange: each request we receive is translated into technologies and innovations aimed at meeting the needs of every single model. We design tires on-demand, suitable to enhance the performance of supercars, or cars with powerful engines. Some cars are fitted exclusively with Michelin tires, among them a few Ferrari, Porsche, BMW M3s and M4s as well as the new Ford Focus RS. We also produce low-rolling resistance tires capable of reducing harmful emissions on some of the best selling vehicles on the market, and that is not all, even Tesla equips its cars with Michelin tires. Each request represents an opportunity to innovate. In addition, from a commercial point of view, OE tires are the driving force behind our sales on the replacement market. For all these reasons, we are willing to establish partnerships with virtually every car manufacturer.

 

Nexen Our goal is to increase our supply of original equipment tires. This announcement, made at the start of construction work at the new Zatec factory, in the Czech Republic, expected to be operative in 2018, sent a clear signal about Nexen’s intentions to expand into the European market and to increase our potential supply of original equipment.

The new factory, in fact, will facilitate the company in supplying original equipment tires to car manufacturers worldwide, including Fiat, Volkswagen, Skoda and Seat. There are currently 30 car-manufacturing facilities within a 400 km radius from Zatec.

 

Pirelli -The process of creating an approved tire lasts up to three years and sees Pirelli committed alongside car designers and their test teams. The research and development work behind the approval of a Pirelli tire is similar to the care a tailor puts in the creation of an exclusive suit, one  that requires different test sessions. This process lasts a long time: three years on average, compared with the six months necessary for the design of a standard tire. In order to transfer new materials and technology into an OE tire, a number of experiments, testing and simulations are needed along with the precious cooperation of the car designers.

Pirelli has developed a great technological know-how which proves invaluable in creating partnerships with some of the best car manufacturers: data exchange, feedback, cross-checks to refine our respective products, all with the goal of producing a flawless tire. The final stages of the approval process, before the final production process and distribution, still require three to six months. In this period the interaction between the tire and the car is perfected and certified for  that specific car model.

 

                                                                               

Yokohama – As far as we are concerned, OE tires are paramount, not so much in terms of sales volumes or turnover. It’s the technical development and performance improvement part we are interested in. OE tires are studied and developed in close partnership with car manufacturers to create a tire that will support a car guaranteeing the best possible performance. This requires an enormous technical effort. Hence, the importance of establishing partnerships directly with car manufacturers not to mention the prestige that comes from this activity. All improvements and innovations are also  applied on other types of products, such as tires sold in the aftermarket.

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