The demand for tyres will grow as new middle classes in developing economies choose top European carmakers over local brands
The automotive industry is exposed to several external factors, such as macroeconomic trends, regulatory obligations and evolving consumer and lifestyle habits. This leads to an ever changing external scenario. There are huge shifts in world demographics, leading to increasing demand for high-end goods and services; the evolution of new technologies in automotive and related fields; and increasing national and international regulation.
There are more than 1 billion cars in the world, 9% of which are; this percentage is set to grow, as consumer preferences move in favour of high-end and the new middle classes in rapidly growing economies choose top European carmakers over local brands.
In 2014, more than 8 million new cars were sold, or 10% of the total. Europe and North America accounted for 63% of this market; 29% were sold in the Asia Pacific region. Following strong growth in recent years, China is now the world’s second largest car market, after the US. Chinese consumers show a clear preference for European carmakers, which represented 70% of total car sales in the country in 2014 and are among Pirelli’s top customers.
This growth offers an opportunity for tyre makers. Approximately 1.4 billion car and light truck tyres were sold in 2014, 30% of the total were fitted to new cars and 70% as replacements, the latter being less buffeted by the dynamics of the automotive market.
Tyres have historically outgrown the rest of the tyre market by three times and this trend was well in evidence in 2014: the global tyre market showed growth of 10% while growth in the non-market was much lower (+1,3%).
Consumer preferences move in favour of high-end and the new middle classes in rapidly growing economies choose top European carmakers
Premium tyres account today for 24% of the total tyre market and are expected to grow to 25% of total in 2015. The market is expected to grow by 7% in 2015 compared with 2.5% for the overall car tyre market.
To stay ahead, Prestige and Premium car designers must constantly refine and improve their models’ performance – placing intense demands and increasing complexity on the tyre manufacturers who supply them.
Pirelli is among the few tyre makers with a clear focus on, we patented process technologies able to deal with rising complexity and variety while keeping cost under control. Most of the world’s largest tyre makers produce high-end tyres, but none are so dedicated to the Premium sector as Pirelli is.
Premium tyres account today for 24% of the total tyre market and a re expected to grow to 25% of total in 2015. The market is expected to grow by 7% in 2015 compared with 2.5% for the overall car tyre market.
Increased connectivity, Big Data and the new technologies
The new world will increasingly be an urban one. Large populations are moving from the country to the city to take advantage of business and job opportunities. It has been forecast that 600 big cities in the world will contribute significantly to global growth over the next 20 years.
Newly affluent consumers in these metropolitan areas will require more than goods. In changing and increasingly affluent societies, people are busier and want higher standards of service and availability. Again, this is an opportunity.
The next two decades will see the rapid growth of the "Internet of Things", or machine-to-machine communication, along with an exponential growth in the amount of data available to companies and consumers.
This offers great advantage. Industrial companies are able to make production more efficient through data analysis and to acquire extraordinary amounts of data on the performance of their products. Equally, marketing departments have access to an unprecedented volume of information, useful to provide higher level of service to customers. Almost every industrial concern in the world is engaged in a race to harness Big Data to give it an edge over its rivals.
PPirelli has already started working on projects such as the Cyber Tyre, with applications in the Consumer and Industrial businesses. This technology is the result of a collaboration between Pirelli’s R&D division and the department of Engineering at The Polytechnic University of Milan.
The Cyber Tyre provides vital information about vehicle performance and road conditions, as well as the tyre’s status, thanks to an embedded electronic sensor the size of a one euro coin. The sensor ‘talks’ via a wireless connection to the car’s on-board computer and other electronics, displaying information to the driver via a graphic interface. This information can be transferred later to a central computer for more analysis. The result will be ever higher levels of safety and performance.
Tyres and the environment
As technology and cities develop, so environmental pressures grow. The Kyoto Protocol in 1997, leading to the Copenhagen Agreement in 2009 and the Cancun Accord in 2010 all oblige governments to reduce carbon dioxide emissions. Transport is a key influence on emissions, especially the driving and making of cars and their components.
This places tyres, one of the key influences on a car’s energy efficiency, under greater scrutiny. Regulations in Europe, the United States and Brazil demand lower fuel consumption as well as encouraging ownership of hybrid and electric cars – and these moves will reward tyre manufacturers which have the right products.
At the same time, the manufacture of tyres must be achieved with less energy, water and raw materials. This puts up technological barriers to new entrants in the tyre market. Other legislative changes place greater emphasis on vehicle safety, benefiting tyre-makers which have sophisticated research and development.
Pirelli develops green performance tyres which maximise respect for the environment and safety. Green performance tyres make up 46%1 of 2014 tyre sales, up from 35% in 2011. The company’s target is to reach 48% in 2017. The rolling resistance of our car products will be reduced by 40% between 2007 and 2020. Additionally we work on environmental process efficiency and have set targets for 2020, as compared with 2009, to reduce CO2 emissions by 15%, specific energy consumption by 58%, specific water withdrawal by 18% and, improve recycling of production waste from 73% to 95%
Global revenues of tyres produced respecting the A, B,C features for rolling resistance and wet grip according to European tyre label regulations.