Tire dealers’ sell out under the lens

After two difficult years following traffic restrictions and various kinds of limitations, the average Italian consumer has significantly changed his or her behaviour and styles. By the end of 2021, more than 63 percent of the population had already reconfigured and rethought their consumption styles, with an approach we have called "Rethink." The main characteristics of these "new" consumers are very obvious.

On the one hand, the constant search for the best value for money. On the other hand, the selection of products, brands and services that respect the values in which the consumer believes. All of which shows by a strong propensity to explore and purchase new products, new brands, and even turn to outlets never tried in the past.

After this difficult period, at the end of February 2022 the world economy, and not only, was again turned upside down by the outbreak of the war in Ukraine. Following this dramatic event “consumer confidence in Italy” dropped considerably (Chart 1) This indicator measuring the degree of Italian consumer confidence plummeted below the average of recent years, approaching dangerously close to the levels touched in February 2020 immediately after the outbreak of the pandemic.

The critical international scenario and rising prices of raw materials and energy have had a significant impact on our consumer; today, Italians are in a defensive position, less inclined to impulsive buying. Rather they now take a thoughtful approach in their purchasing decisions. They are also more careful than in the past to reduce waste and committed to containing their energy expenditures. However, our surveys tell us that Italians are not about to give up travelling, vacations and entertainment.


A good start in 2022

Despite the rather complex backdrop, we still recorded a positive trend in the tire market, especially in specialized tire networks.

In the first quarter of 2022, the "consumer" segment - Passenger Car, 4x4-SUV and Light Transport tires - sold about 3.7 million units, with a trend of +3.3% compared to the same period in 2021. Partially responsible for this result was the generalized price increase that also involved tires, the value generated for the first three months of the year was 389 million euro, up more than 14% compared to 2021.

In terms of units sold, we are still slightly below the pre-pandemic levels of 2019; 3.9 million units were sold in that quarter. While the value generated in 2022 is the highest in recent years.  With nearly 390 million generated in 2022 we are about 30 million above the first quarter of 2019 (Chart 2).


Three trends emerged in recent years

Three trends have become clearly evident in the Italian market in recent years. The first sees the rising importance of the light transport segment. Light trucks and vans were not heavily affected by road restrictions during 2020 and 2021. Deliveries of essential goods during lockdown periods and the expansion of e-commerce in all commodity sectors have played a crucial role in this segment’s growth. Due in part to this increased ability to circulate in recent years, the consumption of light-duty tires has been higher than in the past. This has helped push up sales of this segment, leading it to surpass the 15 percent share in the first quarter, with a growth trend of 9 percent.

The second trend concerns the success of the All-Season segment. After years of steady and relentless growth, this segment now boasts a 28.6 percent market share in the first quarter. Surely, part of the reason must be found in the mild weather that has characterized the last few winters, hence consumers have favoured this solution which guarantees compliance with regulations in all seasons and the correct level of safety in rough weather.

The third trend relates to tires with 17 inch-diameters or larger. As a consequence of new, heavier and larger cars hitting the market, all requiring larger tires, this segment reached 30 percent of the market in the first quarter of 2022, with a growing trend of 10 percent. Within it we can now clearly distinguish the "premium" segment – 18-inch tires and above - which takes up 14.6 percent and growing. 14.6% might still seem marginal, but when observed in value, the premium segment comes to cover 26% of the market, confirming itself as a very interesting segment to generate greater margins.


Rising prices in the various segments

Prices have been a hotly debated topic in recent months, and tires are no exception. Analysing the market for Tier1, 2 and 3 segments part of Europool and tier 4 segment consisting of all brands not included in Europool, it is evident that the first quarter has seen a sharp increase in the average price compared to a year ago. For example, the average price of Tier 2 went from just over 80 euro in early 2021 to over 90 euro in 2022, a net increase of about 10 euro per tire. This is even more evident in Tier1 where, comparing the same time periods, the increase was about 14 euro per tire (Chart 3).

Thanks to the GfK panel of specialized tire dealers we are able to go into even more detail. The increase in average prices is generalized across all product types (Chart 4) - for both Summer and All-Season tires. Winter is still a long way off, but with supply agreements signed in the coming months, average price increases will likewise affect the sell-out during the last months of the year.


Different trends in different areas

The situation within the 4 geographical areas of our country, show us different scenarios (Chart 5).

The Northeast and Central part of the nation showed very positive trends in both volume and value, often characterized by double-digit growth especially in sales generated in the first quarter. In these areas, the best-selling brands are Pirelli and Michelin, in first and second place, respectively. While on the lowest step of the podium we find Continental in the Northeast and Bridgestone in the Centre.

The Northwest, South and Islands show a different scenario. In the first quarter, both of these areas showed a decline in volume, but maintained a positive sign in turnover. Pirelli and Michelin exchange ranking positions in the two areas, Pirelli in first position followed by Michelin in the Northwest, vice versa in the South and Islands area. In third place is Hankook, which consolidates its position in both areas.

In a nutshell, the consumer tire market has performed well early this year, with higher turnovers even when compared to pre-2020 years. The peak replacement season for the Summer and All-Season segments are just around the corner, how will consumers react in this complex geopolitical and economic environment? What effect will it have on the tire market?

GfK will continue to keep an eye on the market by empowering its partners to understand in advance the latest trends and react quickly to threats and opportunities.