Asia only real tire growth market today, economist claims

ERJ staff report (RPN)

By Miles Moore, Rubber & Plastics News

Hilton Head Island, South Carolina – Asia is the only real growth area for the tire industry in the near future, according to a speaker at the 29th annual Clemson University Tire Industry Conference.

"The only real game in town at the moment is in China and perhaps India," said Dennis Byrne, professor emeritus of economics at the University of Akron, speaking on the second day of the conference, held 24-26 April in Hilton Head.

While US tire production has rebounded somewhat since the recession of 2008, shipments in 2012 were stagnant, according to Byrne. International trade in both tires and vehicles is the major reason for this, according to Byrne. About one-fourth of the vehicles and tires sold in the US are imported, he said. But some of the stagnancy in production figures can be traced to other factors, such as the radialisation of the tire industry.

"This was the first real paradigm shift in the industry," Byrne said. "When I was young, a car might need 24 to 28 tires during its lifetime. Now it needs maybe eight to 10. A good radial tire will last almost as long as the vehicle it's mounted on."

Away from North America, the situation isn't much brighter, according to Byrne.

"Western Europe is hurting economically, and that probably won't change," he said. "Eastern Europe shows a lot of promise, but it's too closely tied to Western Europe at present. South America continues to muddle along. It doesn't have much going on yet." Alone among South American countries, Brazil has a good outlook in the intermediate term, though it too has economic problems, he said.

In Asia, Japan and South Korea have slow growth, though the aftereffects of the tsunami in Japan may still explain some of the stagnancy there, according to Byrne. "China is now the largest producer in the world," he said. "But China decided it was growing too quickly, and clamped down on growth. India seems finally to be on the path where they want to be. It's not yet a major producer, but it will be."

Every area of the world faces at least some obstacles to growth, according to Byrne. Even China faces problems including environmental issues, rising wages which make Chinese products less competitive against products made elsewhere, and a lack of skilled labour.

As for Europe, he said, it is enough to know that the crisis in Cyprus, which represents about 0.5 percent of the European Union's economy, was nearly enough to create a continent-wide meltdown.

There is little prospect for the US experiencing significant growth in tire production, according to Byrne. "Replacement tires have sailed, and they're not coming back," he said.

The full version of this story first appeared on our sister publication Rubber & Plastics News.

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