MARKET PULSE 2017 - 2018
Budgets and forecasts
How was 2017? And above all, what can we expect from the new year? We talked about it with some of the largest operators on the Italian market
Listening at the statements from the representatives of some of the most important tire producers, what emerges is a substantially stable trend in the Italian market, also due to a kind of "communicating vessels effect" between segments. If the soaring sales of new cars has inevitably slowed down the replacement market, All Season products are setting new records.
Meanwhile, as the industry awaits the long term effects of these new registrations to re-launch the replacement market, it is conceivable that the enthusiasm fuelled by new generation vehicles will prompt many to look at equipping their cars with new generation winter tires and, at a later stage, with run-flat tires.
As discussions far too often centre around products, territorial presence has been taking on an increasingly greater role. While car dealers and workshops are, on the one hand, offering additional services as retailers and tire fitters, on the other, specialized tire dealers must, according to most of the sector’s manufacturers, urgently consider the opportunity to gear up to offer light engineering services and, above all, decide whether they are still able to cope with the market and its competitors on their own, or consider becoming part of an organized network.
Another aspect that should not be underestimated is, loyalty of the end customer who, after purchasing a new car, won’t need to replace tires anytime soon, and is therefore less likely to turn to a tire dealer unless there’s a need for a set of winter tires or is tempted by the kind of promotions that only large networks can make.
Bridgestone South Region Managing Director
Between January –August 2017, Bridgestone recorded a good percentage increase in turnover in the South Region, largely due to double-digit sales growth of its premium tires. The current market scenario is showing a contraction in the demand for summer tires and favouring winter and All Season products which, although at a lesser degree, are rising steadily.
This was a year in which Bridgestone confirmed its focus on innovation by expanding its DriveGuard range (available both as summer and winter option), as well as by becoming an official top Worldwide Olympic Partner with the launch of the campaign, “Chase Your Dream, No Matter What”, through its Olympic Ambassadors Valeria Straneo, Gregorio Paltrinieri and Gianmarco Tamberi.
The motorcycle sector also followed closely behind recording a significant increase in volumes and turnover, driven by a positive demand but especially by the introduction of new motorcycle radials and dedicated Scooter products.
The Truck & Bus market has remained substantially stable in terms of numbers, while the emphasis on specialization and attention to the needs of the end user is greater.
Bridgestone in 2017 has improved its competitive edge, on the one hand thanks to its Bridgestone Partner specialized truck network, on the other thanks to the ability to provide advanced and innovative "business solutions" such as its Tirematics system (automatic pressure monitoring) and BASys (casings management system). The goal, now and in the future, is to provide simple and effective integrated solutions aimed at reducing fleet operating costs, either through the network or directly with tailor-made programs and offers.
As far as the farming sector is concerned, we foresee a slight drop in demand. Here too emphasis is placed on meeting the needs of an increasingly demanding sector in terms of sustainable performance over time. Given the success of the Bridgestone Partner Truck Network, we have extended the same concept to the farming world adapting technological contents and enhancing synergies.
Continental Italia – Commercial Director
2017 will close in a framework of substantial stability. For two years now, new car registrations have been steadily rising. As new cars leave the showrooms with new summer tires the demand for replacement product has understandably suffered a blow. The effect, though, should turn positive in the medium-long term as new vehicles are likely to be equipped soon with the latest generation of premium winter tires. The same must be said about the first tire replacement in substitution of the original set.
The All-Season option is currently being consolidated and is producing a positive effect in terms of levelling out a workshop’s peak workload, and a negative one because it obviously reduces the number of times customers will visit the tire dealer, thus compromising customer loyalty previously guaranteed by tire storage services. In general, the market trends linked to the All Season products seems to have a greater impact, contrary to the general perception, on summer tires than on winter products, which remains quite stable.
Finally, looking at seasonal replacements, the climate will prompt a growing number of motorists to postpone changing the tires right until the last minute, just before the mandatory period. Therefore, we expect to see a sharp peak in a rather short period.
Multi-specialization in the market is also on the rise. A growing number of car dealers are now trading tires and offering a wide variety of services during a regularly scheduled maintenance stop, which seems to be the winning choice. The BestDrive network is geared to offer a wide range of services and cross selling, all vital in ensuring regular visits to the garage countering the effects of All-Season products.
Ending this consideration about the year, I detected a meaningful rise in the market share gained by low-cost products. In this case, apparently, traders seem to be more inclined toward making a quick sale rather than a medium-long term growth policy. This looks to me as a dangerous trend for a great number of operators currently on the market.
It’s quite difficult to foresee what will happen in 2018, but I expect the market to be quite stable. Prices will have to be carefully monitored, especially in view of the upheavals experienced in 2017, following the rather “turbulent” situation surrounding raw materials. Nevertheless, I cannot see any particular phenomena able to significantly influence sales volumes.
I would like to conclude with a message to the entire supply chain: choices will have to be made in 2018. It’s a matter of choosing whether to face the growing competition and complexities of the market alone – running the risk that this might turn into solitude – or looking at joining large networks – such as BestDrive – obtaining advanced marketing instruments, training and support which are, according to me anyway, essential.
Consumer director Goodyear Dunlop Italia
The last two years, 2016 and 2017 basically confirmed the same trends. All Season tires are growing exponentially both as sell-in and sell-out and Goodyear confirms its rather important share, thanks to one of the widest ranges of sizes, developed for the Premium, Quality and Budget segments. Furthermore, our All Season option scores consistently high in independent tests and is increasingly chosen as standard equipment on large-scale production vehicles as well as more prestigious models.
Expectations on the winter market are also positive, driven by the recent growth in registrations and corporate fleets, despite the fact that predictions are quite difficult, with peak demands even late in the season. Goodyear confirmed its significant share also in this market where the quality of its products have been confirmed by tests as well as the preference shown by private customers and rental companies alike. Summer tires performed poorly on 16'' wheels, but recorded encouraging figures on 17” wheels. Goodyear continues to focus its investments on premium tires: a significant example of this, is the recent project of a new European production line dedicated to a small, high-end production dedicated to some of the most prestigious vehicle brands.
Tires designed for the motorcycle-scooter market suffered a slight contraction in sales volumes, despite the wider options for Sport, Trail and Radial Scooter tires. In these strategic segments, Dunlop is strengthening its presence with an extensively renewed range that is producing excellent results also in sport events.
Signs of improvement have been noticed also in the truck segment in a macroeconomic context of recovery, even though the sell-out has grown irregularly between different geographical areas. However, we’re still looking at a positive 2018. Moreover, Goodyear confirmed its strategy focused on partnerships with top corporate fleets through its premium Goodyear and Dunlop catalogues and strengthened its presence in the budget segment with the success of Debica.
Marangoni Retreading Business Unit and services
The retreading market in Italy as well as Europe continues to experience a contraction in sales volumes even if this trend is slowing down, and negative performance figures are still being recorded over consecutive years. The market in general was influenced by raw material prices and the consequent rush to correcting the price levels, along with the continuous pressure exercised by part of the growing OE market over the tire replacement market, restricting many corporate fleets’ need for tire replacements. The combination of these two factors formed a scenario in which during the first part of the year most operators chased prices and volumes in a negative context for the sell-out market (due to the pressure of the OE market). At the end of the semester, this generated an overstock, forcing the operators to work on the stocks, adapting to a not particularly brilliant replacement market.
In this context, retreaders suffer the continuous changes of the market in terms of volumes and prices, having a greater need - compared to the OE market - of stability and availability by market operators, in order to bring out all its added value and affordability.
The competitive scenario therefore remains complex and highly variable in terms of current trends and strategies: if on the one hand the sector is gearing up to offer multi-brand services as a weapon to contrast the Asian “invasion”, on the other, there’s an on-going search for business solutions in which product and service are integrated in one formula enhancing, through specialized service, the quality of the product and its inherent value. In fact, we are witnessing the continuous growth of the cost-kilometre market and, more generally, an increasing number of customers who look at product management, rather than just sales.
This kind of change in mentality and demand - in terms of the type of business offered – are shaping present and future scenarios for the retreading business in its transition from product that generates value by extending the life cycle of another product that would otherwise to be discarded, to a product/service formula that is part of a single package, and which, through a specific life cycle made of new tires, retreaded tires and services, proves far more competitive than simply resorting to new tires only.
What I expect, therefore, is that the current slump experienced by the OE market will drive the retreading market to a recovery in 2018 with short-term benefits for new tires, and a positive trend for retreaders in the long run, thanks to the growth of the full-service offers and tyre-fleet management.
Commercial Director Michelin Italia
In a market where All Seasons tires kept gaining shares even in 2017, Michelin’s CrossClimate range achieved meaningful results thanks to CrossClimate+ and CrossClimate SUV, designed to meet the needs of a greater number of end users. Being a summer tire with winter certification is a great success in a country like Italy, where the average target customers make up 65% of the market. As has been the case for some years now, the winter market remains as uncertain as the weather recorded in the last winters. The premium segment is also growing and scores excellent results, especially in the wake of the launch of the new Pilot Sport 4 in 2016 and Pilot Sport 4S in 2017, specifically designed for sports cars.
The company’s truck division, despite the on-going contraction of the retreading market, and stable outlook for OE, confirmed its “leadership”, boosted by upgrading important ranges such as the multi-purpose XMulti and XWorks for quarries and building sites.
Our goal for 2018 is to confirm this trend after the launch of the BFGoodrich brand in Europe. Furthermore, our Michelin’s Solution services continues to grow to the point that estimates related to the number of vehicles managed at the end of 2017 will be higher than what was previously thought.
In the two wheels sector, the market was rather disappointing compared to the previous year. In this context, however, the launch of our new Power RS, a high-performance product for road use followed by the launch of a new Enduro tire, allowed Michelin to record significant sales volumes especially in the second half of the year, thus consolidating our position in the market.
CEO Pirelli Italia
2017 was a very important and satisfying year for Pirelli on all fronts. In fact, after two years, we made a welcomed return to the Milan Stock Exchange.
As far as the market is concerned, we have witnessed a further consolidation of the All Season segment. Not surprisingly, this year we have introduced an evolution of our Cinturato, the All Season Plus version, to meet the demands and needs our customers.
The higher demand for tires with larger diameters (over 18 inches) was a further novelty. And this was true for both summer and winter tires. Pirelli's commitment towards these products makes us very confident about the results we can expect for the entire 2017. A year that has, once again, seen our presence with an important market share in the most prestigious segment and a technological partner of premium car manufacturers. The great number of approvals obtained is proof of this. In fact, we have witnessed an acceleration in the development of custom made tires, the core of our Pirelli industrial and commercial strategy: the "Perfect fit".
Our focus on the Consumer, makes us the only Pure Consumer Tire Company, and this will allow us to further capitalize all our assets (cars, motorbikes and, from this year, also bicycles).
Our highly qualified retail network will then allow us to supply our consumers with the best answer to their needs, seizing all the opportunities on the Italian market with an eye to the future. Our Cyber Technologies project, in fact, established as early as 2005, has the target of producing the best possible car-tire-motorist integration. Because innovation cannot overlook the role played by tires.
General manager Triangle Tyre Europe
After being successfully listed on the Shanghai Stock Exchange in September 2016, Triangle Tyre started a process of globalization opening commercial offices in every continent. The world's fourth largest manufacturer of earthmoving tires, Triangle is also very active in the Transport and Automobile sector, and especially in the latter, a major renewal of the range is under way to undermine the leadership of several other mid-range producers and gain new market shares.
This operation is part of a development strategy aimed at strengthening the group's position globally. Europe and Italy - the new European division is based in Milan - represent strategic markets for our company. The first six months of 2017 were spent on establishing our European branch, recruiting key figures for the team (mostly Italians with great and proven experience in the tire industry), analyzing the existing distribution channels and studying what kind of products would be suited to our markets.
Despite being a new company, in the first nine months of the year we were able to increase, both in Italy and in Europe, our sales volumes, both in the automotive sector as well as the commercial vehicles segment. As far as earth moving equipment, we have always been one of our country’s top players with a market share of nearly 20%, thanks to the excellent work performed over the years by our historic partner and distributor Sunebo of Moncalieri.
Moreover, Italy, like the rest of Europe, is a rather dynamic market with a growing number of new registrations, and with some segments (such as the All Season) that are taking an increasingly larger market share. We are nurturing ambitions programs in Europe and beyond. New trade agreements with important new customers will be announced in the very near future, and new products and marketing programs are about to be launched. Thanks to the enlargement of the customer base and the investments made in 2017 we expect a very strong response from both the Italian and European market.
Managing Director Toyo Tire Italia
The data in our possession at the moment indicate that the Italian market, at least in the automotive sector, will confirm the same general values expressed in 2016. Higher car sales by manufacturers not included in the official ETRMA data, will offset the slight decrease in sales volumes that will probably be recorded by the association’s members.
Given the context, different types of products are behaving in different ways, such as summer tires, heavily penalized by the increase in new registrations, and the relentless growth of All Season products driven by a strong spontaneous demand: the suspicion is that the sale of this type of product is often offered to groups of consumers who, due to mileage and conditions of use, would still need double equipment, which, no doubt, still remains the best technical solution.
Winter tires are expected to remain substantially stable in their sales volumes driven by a thriving car market that will offset the slightly lower sales volumes, though still considerably less than what was suffered by the summer products, resulting in a booming trend for the All-Season offer.
Following the introduction of our Nitto brand in Italy, with the Sirio Group as the exclusive distributor, and the higher sales volumes of our TAMP4, reserved for a specific category of top specialist retailers, we managed to increase our summer tires sales volumes. At the same time, the launch of our new Snowprox S954 and Snowprox S954SUV sustained our winter offer with higher sales compared to 2016, while our new All Season Celsius allowed Toyo Tire Italia to meet the spontaneous demand of the market for quality and quantity.
In 2018 all the trends already highlighted during 2017 should be confirmed and, as far as Toyo Tire Italia is concerned, the current commercial strategy will be confirmed given the satisfying results recorded so far.
Commercial Director Yokohama Italia - Magri Gomme
In my opinion, 2017 was a difficult year to interpret. Signs of instability were there already at the end of 2016: rising raw material costs and consequently rising prices. But it is in the first half of 2017 that the situation became very complicated, especially for companies like ours as we are heavily exposed with Asian markets. In China, production was subject to fixed quotas, following a strong anti-pollution plan (just think that in 28 cities in five different regions, steel production has been cut by 50%) and because of the difficulties associated with the procurement of raw materials. Even though commodity indices were back to pre-increase figures already in March, tension on the Chinese markets persisted. This tension, though diminished, has by no means disappeared: some Asian producers have, in fact, already announced new price hikes. Hoping that, in the meantime, nothing socially dangerous will startle the geopolitical “chessboard” (North Korea - South Korea - Japan - China), 2018 should start off substantially stable.