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Page i

© 2004 All content copyright Aroq Ltd. All rights reserved.

Tyres: trends, companies, market forecasts to 2006 2nd Edition SAMPLE

2004 edition

by Matthew Beecham

January 2004

Published by

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Table of contents

Single-user licence editionCopyright statement

Table of contents

List of tables

List of figures

Acknowledgements

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Market summary

Chapter 1 IntroductionRound, black and boring

Report coverage

Chapter 2 Market trendsMarket players - Bridgestone

Continental

Cooper Tire

Goodyear

Hankook Tires

Kumho

Michelin

Pirelli

Sumitomo

Toyo Tires

Yokohama

Market shares

World

Europe

North America

Asia-Pacific

Market size

Market forecast

Merger, acquisition and joint venture activity

Plant investments

Page iv


Chapter 3 Technical trendsTREAD Act

Tyre pressure monitoring

Run-flat tyres

Eco-friendly tyres

Smart tyres

Manufacturing trends

Chapter 4 ManufacturersBridgestone

Continental

Cooper Tire & Rubber

Goodyear

Hankook Tires

Kumho

Michelin

Pirelli

Sumitomo

Toyo Tire & Rubber Co Ltd

Yokohama Rubber

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Other research reports

Global news and feature articles

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Your feedback

Page v


List of tables

Table 1 Global market shares for tyres, 19xx – 20xx (% of market value)

Table 2 European replacement market: Distribution channels as a percentage of units sold

Table 3 World market for OE tyres by geographical region, 2002 (Millions of tyres)

Table 4 Asian OE market: OE market growth by geographical area, 20xx - 20xx (% growth /

decline)

Table 5 Asian replacement market: Replacement tyre market growth by geographical area,

20xx – 20xx (% growth / decline)

Table 6 The European and North American replacement markets by segment, 2002 (%)

Table 7 World light vehicle tyre sales, 20xx – 20xx (million units)

Table 8 World medium and heavy duty truck tyre sales, 20xx – 20xx (million units)

Page vi


List of figures

Figure 1 Something to sing about:

Figure 2 The Flag Ships of Dunlop Motorbike tyres: From left: Sportmax D208, Sportmax

D220 ST, Trialmax Radial D607 and Arrowmax GT 501

Figure 3 Global market shares for tyres, 2001 (% of market value)

Figure 4 Sales comparison of Bridgestone, Michelin and Goodyear, 19xx – 20xx (US$

millions)

Figure 5 European market shares for OE and replacement tyres for passenger cars, 20xx (%

of volume)

Figure 6 European market shares for OE and replacement tyres for commercial vehicles,

20xx (% of volume)

Figure 7 European market shares for replacement tyres for all vehicles, 20xx (% of volume)

Figure 8 North American market shares for OE and replacement tyres for passenger cars,

20xx (% of volume)

Figure 9 North American market shares for OE and replacement tyres for commercial

vehicles, 20xx (% of volume)

Figure 10 North American market shares for OE tyres for all vehicles, 20xx (% of volume)

Figure 11 North American market shares for replacement tyres for all vehicles, 20xx (% of

volume)

Figure 12 United States distribution channels for replacement tyres (Distribution channels as a

percentage of units sold)

Figure 13 Chinese tyre market shares, 20xx

Figure 14 World tyre market by product line, 20xx (% of volume)

Figure 15 World tyre market by product line, 20xx (% of value) Error! Bookmark not defined.

Page vii


Figure 16 World market for OE tyres by geographical region, 20xx (% of volume)

Figure 17 The world tyre market: sales by geographical region, 20xx (% of volume)

Figure 18 Asian OE tyre sales by geographical area

Figure 19 Asian replacement tyre sales by geographical area, 20xx (% of volume)

Figure 20 Raw materials used in tyre production

Figure 21 Cutaway of Michelin's PAX tyre for the Audi A6

Figure 22 Dunlop DSST:

Figure 23 The world’s first tyre using extracts of corn

Figure 24 Yokohama's tyres for the Aston Martin Vanquish

Page viii


Acknowledgements

The publishers would like to give Special thanks to Bridgestone; Goodyear;

Michelin; Dunlop and Sumitomo for their assistance in compiling this report.

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Market summary Page 1


Market summary

The last xx years have seen a dramatic concentration in the number of major

players in the tyre market - five of the ten largest companies in 19xx have now

been taken over by competitors. This concentration is continuing through in a

less dramatic manner, with smaller companies forming alliances or being

bought out by larger competitors. As a result, the three largest companies -

Bridgestone (based in Japan), Goodyear (based in the US) and Michelin

(based in France) - now dominate the world market with a share of about 60%.

These are the only truly multinational companies with manufacturing facilities

and sales networks in most of the world regions. Other significant competitors

include Continental, Cooper Tire, Pirelli, Toyo, Yokohama, Kumho, Hankook

and various regional manufacturers.

Even though the largest companies have a turnover well in excess of $10

billion, they remain largely specialist tyre manufacturers. Almost all of

Michelin's sales are attributable to tyre manufacture, as is over xx% of

Bridgestone's and Goodyear's. Many of the smaller companies also

concentrate almost exclusively on tyres. However, the medium-sized

companies are diversifying away from tyre manufacturing. Pirelli has always

had extensive interests in cable manufacturing, Continental has now acquired

a large business in automotive brakes and Cooper has also diversified by

buying a manufacturer of automotive components.

As a matter of policy, most vehicle makers dual-source for every model and

spread their total purchase of tyres over three or four manufacturers. The type

of tyre specified by the vehicles makers differs markedly from one region to the

next due to the different vehicle mix sold in each market and the different

driving habits.

The last decade has seen a growing market for tyres but despite this, the

industry has not been particularly profitable. It is essentially a commodity

industry and although it has high-tech products, the majority of its products are

vulnerable to price competition from low-cost manufacturers. An obvious

reaction has been the development of brands, but an examination of the



accounts of companies in the industry show that there are some distinct

advantages in size.

Although the big three manufacturers have a majority of the OE global market,

they do not dominate it in Europe, as Continental and Pirelli also have

significant shares. Here, the market is very stable, and shares do not change

much because of the long-term contracts in place with equity chains and

independent dealers. The major brands marketed in the European

replacement tyre market include Michelin (including Kleber and BF Goodrich),

Continental (including Uniroyal, Semperit and Gislaved), Bridgestone

(including Firestone) and Goodyear (including Dunlop).

Although Goodyear ranks third in the world, it is the largest company in the

North American OE and replacement tyre market with a xx% share, followed

by Michelin (with a xx% share) and Bridgestone/Firestone (with a xx% share).

In the North American replacement tyre market, there are three broad groups

of brand in the North American market and the major manufacturers are

normally associated with all three. Flag brands are the main advertised brands

used by each company and these are the ones that receive the marketing

support. The same companies make associate brands, but they receive far

less support and are sold at a lower price through the normal distribution

channels.

The world tyre market is essentially a replacement market in terms of volume

(xx%) and value (xx%). Although only one-quarter of road tyres are specified

and bought by the vehicle makers, this segment of the market is significant as

it drives technical development and has a major influence over the aftermarket.

The tyre market’s value is split evenly between Europe, xx%, North America,

xx% and Asia, xx%. High-performance tyres represent xx% of the world

market in volume but 25% of the industry’s margin. xx% of this market is in

Europe, where it is growing by xx% a year.

The Bridgestone/Firestone recall in the summer of 20xx heightened consumer

awareness for tyre road worthiness and safety, stimulating demand for high

performance tyres including run-flats. The Transportation Recall

Enhancement, Accountability and Documentation Act (or aptly named TREAD

Act), which was signed into law in November 20xx by then-President Bill

Clinton, called on the National Highway Traffic Safety Administration (NHTSA)



to modernise the xx-year-old tyre safety standard and mandate tyre pressure

monitors. The Act demands reforms on a range of tyre-related areas, including

tyre pressure monitoring, tyre labelling, tyre testing standards, early warning

reporting systems, safety recalls in foreign countries and sale or lease of

recalled tyres. For example, tyre labelling requires manufacturers to mark up

certain details on both sides (not one as previously required) of the tyre, such

as tyre inflation pressure, maximum load rating and tyre identification number.

But US tyre manufacturers are reported to unhappy with the TREAD Act,

claiming that the law shifts responsibility for looking after tyres from the

consumer to the manufacturer, unlike in the UK for example, where random

tyre checks on cars put the responsibility clearly with car owners. The industry

is also critical of the recent NHTSA decision on tyre pressure monitoring

systems. Both systems allowed under the current law allow the tyres to fall to

as much as xx-xx% below recommended pressure before triggering an alarm,

encouraging the motoring public to habitually drive on under-inflated tyres

without checking them, argues the industry. Tyre makes are also unhappy with

the EWRS (Early Warning Report System) that will collect information from

tyre and car manufacturers and their customers to create a major database of

field reports, customer complaints, and damage claims relating to tyres. The

NHTSA is also proposing to make this information widely available in the

future, exposing the industry to further embarrassing and potentially costly

scrutiny. Proposed changes to the way tyre information and labelling is carried

out will also cost manufacturers extra money, and, claims the industry, will

slow down the manufacturing process. The result of all this is that customers

will see higher tyre prices and fewer warranty adjustments in the future, and

will blame an industry which already has a very good safety record.

The US government’s campaign for safer tyres is also believed to have

triggered interest in so-called run-flat tyres. A recent survey by JD Power

showed that xx out of xx consumers put run-flat near the top of their wish list for

their next car. In the event of a flat tyre, the vehicle can travel at speeds of up

to xx mph for up to xxx miles (depending on the vehicle), giving the driver

plenty of leeway to reach a repair centre. The advantages are obvious to the

driver and there are significant advantages for the manufacturer, as in theory it

obviates the need for a spare wheel, thus saving both space and weight.

However, the cost is usually high, as they normally require a special wheel

design and, perhaps most important of all, the frequency of punctures is

declining.



In Europe, Michelin has supplied its PAX run-flat tyre system to the Renault

Scenic and two concept cars, the Renault Ellypse and Citroen C-Airdream. In

November 20xx, Michelin began fitting the system, as an option, to the new

Audi A8. Michelin also supplies its PAX system for the new Rolls Royce

Phantom. BMW and Mini also offer run-flat tyres on some models either as

standard or optional fitment. In the US, Goodyear pioneered run-flat tyres,

developing them the Chevrolet Corvette, Plymouth Prowler since the 19xxs.

Michelin believe that there is huge potential for the development of run-flat

technology, predicting the market ‘could reach xx million systems by 20xx’.

Bridgestone produced around xxx,000 run-flat systems in 20xx, up from just

xx,000 in 20xx. Bridgestone forecast it will produce some xx million units by

20xx. Sumitomo Rubber Industries also anticipates a meteoric market,

producing some xxx,000 systems in 20xx, up from xx,000 in 20xx.

Chapter 1 Introduction Page 5


Chapter 1 Introduction

Round, black and boring

Most people rarely give tyres a second thought, but the tyre is actually a highly

complex product packed with advanced material engineering. And the industry

itself is far from boring. It is an economically important one. The three largest

companies - Bridgestone (based in Japan), Goodyear (based in the US) and

Michelin (based in France) - collectively generate annual sales revenues of

around $xx billion, employing xxx,000 people worldwide. And its structure is

ever changing, too. The last xx years have seen a dramatic concentration in

the number of major players in the market - five of the ten largest companies in

19xx have now been taken over by competitors. This concentration is

continuing through in a less dramatic manner, with smaller companies forming

alliances or being bought out by larger competitors. As a result, the Big Three

tyre makers now dominate the world market with a share of about xx%. These

are the only truly multinational companies with manufacturing facilities and

sales networks in most of the world regions. Other significant competitors

include Continental, Cooper Tire, Pirelli, Toyo, Yokohama, Kumho, Hankook

and various regional manufacturers.

Above all, it is a politically sensitive industry because of its size, its

environmental impact and its multinational ownership. France has passed a

new law to promote used tyre recycling that will force all tyre producers and

importers to pay for the costs of collecting, transporting and recycling car and

light-truck tyres from the beginning of 20xx. A year later, the same law will

apply to truck tyres as well. Seven major tyre makers have already formed an

association, Aliapur, to co-ordinate the collective recycling efforts. They

estimate that the per-tyre cost will be from €xxx to €xxx, depending on size.

France wants to get rid of an estimated backlog of xxx,000 tonnes of

discarded tyres. Some xxx,000 tyres are discarded annually but only half are

recycled and the rest go into landfills or are just stored or dumped. French

garages have welcomed the move, as they will not have to pay for recycling as

their counterparts in Sweden do. The EU does not yet have a tyre recycling

directive, but tyre manufacturers are getting ready for the day when it does.

Chapter 1 Introduction Page 6


It is also a mature industry. As a result, we cannot expect annual growth to

exceed around x%, though the sheer size of the Big Three allows them to find

economies of scale that the smaller players cannot reach. As a result,

companies like Pirelli and Continental have chosen to diversify; Pirelli in cables

and telecoms, Continental in braking and chassis systems. However, a mature

industry can often be remarkably volatile when the companies within it jostle

for position. It is difficult to grow market share in a mature market.

Consequently, increases in productivity and new capital investment both build

up the available capacity. As a result, pricing becomes more competitive and

the companies face the prospect of static or even declining revenues. The

individual firm’s response is often to buy growth by acquiring a competitor, and

once one company does this, the others tend to follow, as they cannot afford to

be left behind.

Report coverage

In this second edition reviewing the key market drivers for tyres, Chapter two

sets out market trends, prospects for the major tyre makers as well as

determines some market shares for OE and replacement tyres in Europe,

North America, some parts of Asia and globally. It will also provide you with the

market size and forecasts through 2006. A round-up of merger, acquisition and

joint venture activity and capital investments is also included.

Chapter three reviews recent technical advances in tyres, including run-flat

and eco-friendly products.

Chapter four provides brief profiles of the major tyre makers, namely,

Bridgestone, Continental, Cooper, Goodyear, Hankook Tires, Kumho,

Michelin, Pirelli, Sumitomo, Toyo and Yokohama.

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just-auto · include Continental, Cooper Tire, Pirelli, Toyo, Yokohama, Kumho, Hankook and various regional manufacturers. Even though the largest companies have a turnover well in