Interview: Germany adapting to new market challenges

Article published in the September/October edition of European Rubber Journal magazine

ERJ talked to Hans-Jürgen Drechsler of the German tire trade association the BRV about current trends in country’s tire market:

As managing director of German tire trade association the BRV, Hans-Jürgen Drechsler has a clear view of current trends in the country’s tire market, which is widely regarded as the engine for growth in the European tire industry.

Reviewing Germany´s replacement tire markets, Drechsler sees three different influencing factors this year: The development of the number of vehicle sales; mileage of cars; and mileage of tires.

“The number of vehicles in Germany and in western Europe, will increase only slightly, as cities and streets are already congested,” explained Drechsler. “As a consequence of this higher traffic density and higher costs of fuel, the maintenance of cars and driving will be more expensive. People will, therefore, drive less.”

Meanwhile, he noted, the mileage of tires is increasing due to technical improvements, which in turn means that there is less need for new tires.

“These three influencing factors point to a stagnation of the German and western European aftermarket for tires. This is what we expect in 2016,” said the BRV chief.

Then there are the challenges associated with the increases in range of automotive vehicles coming on the market. This trend, said Drechsler, applies not only to top-of-the-range and mid-range passenger cars, but also to small cars.

“Within the top-range, mid-range and small-car categories you can find a larger variety of products, such as SUVs and electric vehicle. As a result you have to supply a larger range of different tires for all these different types of vehicles.”

The industry has also to address the increasing introduction of more sophisticated control technologies, with tires now serving as an important component of these complex systems.

Chip-in-tire

“In the beginning we had TPMS, and developments will next lead to a ‘chip-in-tires’ system, where all kind of information will be delivered by tires, such as tire-pressure, temperature etc.,” said Drechsler. “As a consequence tires will become more high-tech and more important in the future.”

“This means that tire retailers have to diversify and explore different distribution channels and develop multi-channel strategies for the market,” the German tire industry leader commented.

Asked about the impact of cheap imports from countries such as China on the market, Drechsler said there was “no significant influence” for passenger cars, 4x4, SUV and van tires because in Germany purchasing decisions are “considerably influenced by the tests published in magazines etc. In these tests Chinese tires still do not perform very well.”

However, he added that the situation was very different for truck tires: “There we find a significant impact on new tires and retreaded tires. BRV will continue its efforts for anti-dumping proceedings [to be taken against cut-price tire imports].”

The BRV is, for example, currently making representations to the European Commission on behalf of the EU tire retreading industry, which is being impacted by a flood of cheap Chinese imports sold across the region at below cost price. This situation looks set to worsen due to the imposition of import duties on Chinese tires in other world regions, particularly the US.

In the retail sector, meanwhile, the BRV has closely tracked the development of on-line tire sales, a trend it believes will have significant impact on its member companies.

According to Drechsler, in 2015, 10.9 percent of all PCR and 4x4 tire sales in Germany were on-line – up from 5.8 percent in 2011. The growth in online tire sales, so, has levelled off since 2013. But, he added, that in Germany, there is a potential for online-sales of PCR (incl. 4x4) tires to grow to approximately 20 percent of sales.

Meanwhile, in the area of extended mobility, Drechsler sees only limited pick-up in demand for runflat tires, despite the introduction of new products for the replacement market by companies including Bridgestone and Maxxis.

“There is no larger market penetration, because there is only BMW Group, which equips cars with runflat tires as standard, the trade association boss explained. “Therefore in the aftermarket there is only a need for runflat tires for these cars and so the demand will stay limited.”

And summing up the current status of tire labelling in the German tire market, Drechsler said the EU tire rating scheme had “no significant influence on the aftermarket in Germany, because the European tire label still did not seem to have a considerable influence on purchasing decisions by the consumer.

“We suggest, that a major reason for the lack of influence of the tire labelling for the consumer is that there is no real/effective product monitoring, whether in Germany or in Europe. Therefore, there is no control of values, which are claimed by the manufacturers.”