THE PULSE OF THE MARKET (2016-2017)
Reports and forecasts
How will 2016 end? And what will the new year be like? We had a frank discussion about these questions with some of the market’s top executives
The end of 2016 inspired a cautious optimism throughout the tire world. At least, this is the feeling we get speaking with some of the market’s top executives. “Riding the recovery”, “partially satisfied”, “slight turnover increase” are some of the most frequent expressions we gathered, enough to underscore an encouraging finale as well as a promising future.
The recent boom in new car sales has certainly stifled the performance of the second-hand market, on the other hand this has promoted a greater care and attention towards the new car segment which has, at the same time, stimulated further the winter tire market. New innovative technologies, new services for the end customer and a constant development of the supply chain are some of the reasons behind the positive results recorded by the Italian tire market, thanks also to important feedbacks coming from the trucking and biking sectors.
To disrupt things and create concern among the operators, however, we find Asian companies and their aggressive pricing policy, which, at a time of great and widespread economic difficulty, represents an attractive proposition for most end-customers. In addition, this phenomenon is negatively affecting also the retreading industry by, not only offering ultra-low cost new tires but flooding the market with low-quality products that cannot be retreaded.
Stefano Parisi (CEO Bridgestone South Region)
During the January-August 2016 period, Bridgestone’s South Region recorded a slight turnover increase, in terms of percentage, thanks mainly to positive sales volumes recorded by both winter and summer products. For the company, this was a year of great innovations, characterized by the launch of our new DriveGuard (available in both summer and winter version) through which, Bridgestone can supply all cars equipped with the most advanced TPMS technology also a run-flat solution.
In the motorbike segment sales recorded a substantial increase with a percentage growth of the turnover in double digits, following the launch of our Battlax Hypersport S21, a tire especially designed for superbikes.
In the trucking segment the spotlight has always been on the network of specialized Bridgestone Partner dealers with a special focus on Senza Pensieri by Bridgestone, an innovative program dedicated to fleets, which allows Bridgestone to offer, in addition, some of the other brands in the group (including Firestone, Dayton and Bandag) with a seven months deferred payment scheme.
Alessandro De Martino (CEO Continental Italia)
The information we have on the year’s trend make me think that, at the end of 2016 we will be satisfied in terms of sales volume, but probably a little less in terms of profitability. The cause of this state of affairs must be sought above all in the growing pricing strategy behind Asian products, a pressure that in the light of recent events is set to increase even further. When I talk about products from Asia I am not referring exclusively to Asian brands as such, but more in general to the production that arrives from that continent. I wonder, therefore, if sooner or later, we won’t have to question the actual industrial costs of all these products. In addition, if on the one hand we are recording significant growth in terms of sell-in, we are equally recording a significant decline in the sell-out.
The current growing trend in new car sales, that has so far characterized 2016, has quite obviously negatively affected the summer replacement market, yet, it should, on the other hand, give new impetus to the sale of winter products, a sector in which, as confirmed by a number of tests carried out by specialized magazines and independent institutes alike, we are the market leaders.
Furthermore, things are looking rather good for us in both the commercial and industrial segment, both for the Continental brand, which continues to add services to support the new Generation 3, and Semperit, following last year’s success and further strengthened by the launch of a new product range. Moreover, also motorcycle tires have represented a success story, especially as this market was affected more than all others due to the unusually wet spring weather. Yet, despite these unforeseen difficulties, we have enjoyed, in total, a rather positive trend gaining greater shares of the market.
The distribution chain is continuing in its development path and we expect an evolution towards greater coordination of independent retailers.
Samuel Cunado (South Europe General Manager Goodyear-Dunlop Tires)
2016 will be remembered as the year of the All Season, the only segment to record a decisive growth, to the detriment of summer products. A great opportunity indeed for Goodyear, among the first companies to believe in the potential of this product and the only company to have an All Season offer in every price range (Goodyear Vector4Seasons, Sava Adapto and Fulda Multicontrol), including a version dedicated to the SUV market.
Considering the steady growth in new registrations and corporate fleets, also the winter market, by virtue of the consolidated quality of its products, has been a source of great satisfaction for Goodyear, and the result of a consistent R&D effort, universally recognized by independent tests acknowledging the quality of Goodyear’s and Dunlop’s winter products.
The growing interest towards wider rims, driven by the evolution of the vehicles currently offered on the market, allows us to take advantage of our long standing partnerships with some of the most prestigious car manufacturers focusing more on the development of solutions designed to meet the needs of future motorists.
As far as the transport sector is concerned, despite the encouraging signs recorded earlier in the year, the second part of 2016 fell back to a negative sign. In this scenario, Goodyear has been able to hold its market share, especially in the premium segment, thanks to the quality of its products, widely recognized by trucking companies, and partnerships with key players.
For 2017, we expect to consolidate these trends even further, as well as taking advantage of additional growth opportunities, especially in the premium segment.
Fabio Falorni (President of Intergomma – exclusive Aeolus importer)
This year started with great expectations fueled by positive signs, even though the market had not yet shown the consistent signs of recovery we would have liked, with many contradictory economic data. But by now, we can state that we have been “riding the recovery”, and for the last two years, things have started to go in the right direction, resulting in a very satisfying financial year.
We need to emphasize, however, that in order to stay in business and perform up to standards, a medium sized enterprise like ours must always be open to changes. The world, including the tire world, is quickly evolving and the opportunities are there, but one must know how to grasp them, or create new ones… like opening a new retail and service center in Livorno, an investment that makes us look with even greater enthusiasm to the future. Aeolus (part of the ChemChina group, which acquired Pirelli in 2015) will supply new tires throughout 2017, with the same DNA as always, based on innovation and quality, supported by a pricing policy that will make us highly competitive.
All these preconditions, as well as the arrival of the winter season (not to mention the strong recovery in the car market), create further optimism and confidence that 2017 will consolidate the current positive trend. We are looking at conquering new markets and consolidating the already acquired positions. The Car industry, as well as Vans, Transport vehicles, Earthmovers and Farming machines, will still be our focus and as one year draws to an end, we are building the foundations for the next, which will see our workforce grow to address the next decisive challenges.
Brenno Benaglia (Sales Director Marangoni Commercial & Industrial Tyres)
2016 confirmed the decline of the Italian retreading market, which shrank, at least for the trucking sector, by almost 50%.
The first reason for such negative trend must be found in the low price of new tires manufactured in Asia: products that reduce sales opportunities for retreads and whose casings have a retreadabililty rate next to zero, not to mention their mediocre performance compared to a quality retreaded product.
In an effort to stem the tide, even the most qualified producers have lowered prices and started promoting their budget brands, which, in turn, end up competing with retreaded products.
The very presence of premium manufacturers in the retreading sector would be positive if it weren’t for the strategy of some producers to bet on price lists well below the quality product offered by retreaders.
In a competitive and increasingly complex environment, the only winning strategy in the medium and long term must take into account shifting the customer’s attention towards performance: far too often we find end users reverting back to new tires after having been disappointed by poor quality retreads. Products that damage the reputation of the entire sector and whose responsibilities must be shared among the retreaders themselves, the suppliers of materials and those who should control them and often don’t.
Nevertheless, I believe that this "adverse environment" will not prevent quality retreads from being able to carve out the place they deserve on the market. In fact, new premium tires will be truly successful only if accompanied by high performing retreading technology, able to guarantee a second and third lifespan to their casings.
For this reason, the renewal of the national running fleet, started in 2015, must be considered positive. Although this translates into a temporary slowdown in sales of replacement parts and consequently retreads too, we do expect a complete reversal starting next Spring, when premium casings equipping new vehicles will start circulating.
I expect, therefore, a slight recovery of the retreading market from mid-2017, and we’ll be ready and focused on reaching our goals.
Andrè Billet (Sales Director Michelin Italia)
The car sector is giving great signs of recovery that will positively affect the premium tire sector too, while factors related to the winter market are still quite foggy, conditioned by the recent irregular weather patterns and unusually mild winters. Our forecasts for 2016 confirmed that in this context, Michelin will continue to strengthen its "leadership." Especially noteworthy is the success of Michelin’s CrossClimate, a true benchmark, which can guarantee safe travelling throughout the year, and the new sports oriented Pilot Sport 4.
The industrial sector, on the other hand, has already provided excellent results thanks to our Michelin Solutions service, which recorded a 15% increase of vehicles managed in "outsourcing" over the previous year. As for sales of new and retreaded tires, despite the recent economic downturn, we have managed to confirm our market share and therefore our "leadership".
In the motorcycle segment, results were also positive thanks to massive investment in research and development, which have allowed us to completely renew our range of sports tires and to launch two new radial products for scooters.
Fabio Merli (CEO Toyo Tire Italia)
At the end of 2016, our sales volumes in the car and light truck segments of the Italian market should confirm the same numerical values recorded in 2015. Considering the current trends, we expect an increase in All Season tire sales, although this will happen at the expense of Summer products. In contrast, Winter tires are expected to produce a small increase due to the positive trend in new car registrations, which will need to be adequately equipped for the winter season, hoping the weather is not going to play tricks.
In this context, Toyo Italia will insist in its “step-by-step” policy hoping to close with a sales increase driven by the success of our TMP4 project, an exclusive product for Toyo Tires Key-Customers, as well as the launch of new products such as our HP S954 winter tire and our innovative All Season Celsius.
For 2017, while we do not expect appreciable market variations, as Toyo Tire Italia we have set a target for further growth based on strengthening the existing relationship with our specialized dealers, on the constant renewal of our product range including the launch of our new UHP Proxes Sport and the involvement of other players in the market, to which we will offer exclusive products that can, not only ensure profitability, but also provide the specialists the pleasure of managing their "own brand" product. The growth will then allow us to continue investing on increasing brand awareness, therefore our commercial partnership with AC Milan will continue, as well as on our affiliates points of sale with new promotional and advertising initiatives in co-branding scheduled throughout 2017.
The Italian market is experiencing an epoch making transformation. Great takeovers and mergers, not to mention closures, will change permanently both the structure and the dynamics of the market. Despite this context, we still have great trust in our specialized dealers who, despite all the difficulties they are called upon to face each day, will remain the focus of all our efforts.