Pramod Thomas | Mar 14, 2018 | 0
Powered by China, India Global Demand to Hit 4.3%
Tyre Asia News Bureau
The Cleveland-based Freedonia Group, the world’s leading industrial research company publishing more than 100 sectoral studies annually, says growth from Asia, in particular China and India, would drive up global tyre demand by 4.3 per cent annually though 2017 to 2.9 billion units. Explaining some of the key findings of the study, Freedonia Analyst Elliott Woo told Tyre Asia that the demand growth will be driven by rising incomes in developing countries, which will contribute to higher levels of vehicle ownership
Freedonia Group’s latest market research World Tires says global tyre sales should reach 3 billion units in 2019, in the context of rising incomes in emerging markets, particularly in China and India.
The healthy growth is predicted on the basis of projections on the rising incomes in developing regions that would spur growth in the number of vehicles in use, fuelling demand for tyres.
Higher income levels and expanding economic activity will also contribute to increases in average annual vehicle mileage, theoretically boosting replacement rates.
However, the increase in miles driven will be offset by rising tyre quality, including tyre life, which would exert downward pressure on replacement rates.
The per capita usage of both motor vehicles and motorcycles would rise, that would lead to heightened demand for tyres in replacement applications.
Production of new vehicles will increase to meet the growth in demand, fuelling gains in sales of tyres in OEM applications.
“Growth in demand for tyres will be driven by rising incomes in developing countries, which will contribute to higher levels of vehicle ownership,” Freedonia Analyst Elliott Woo told Tyre Asia.
The factors affecting tyre replacement rates differ in developed and developing markets. In developed countries, replacement rates will be impacted by rising tyre quality and increased consumer usage of high-performance tyres.
However, the outlook for tyre sales in developed countries is less positive. Vehicle ownership rates in countries such as the US and Japan are already very high, limiting the remaining growth potential for the key drivers of tyre demand.
Adoption of high-performance technologies will lag in developing countries. However, average road quality is expected to increase as governments invest in improving their infrastructure, increasing the longevity of tyres in these countries. Low-cost, low-quality tyre manufacturers will also be displaced as industry standards rise in major producing countries.
Some consolidation in China’s tyre industry has already occurred in recent years, and several tyre producers in the country have shut down since 2013. At present, overcapacity remains a problem in China’s tyre industry.
In 2014, tyre producers in China had one of the lowest average capacity utilisation rates in the world. It is expected that consolidation will continue over the next several years, with low-cost, low-quality tyre factories continuing to close.
China, which accounted for 22 percent of world demand in 2012, is continuing to grow, albeit not at the pace it expanded in 2007-12 and as expansion of both motor vehicle production and vehicle usage will decelerate.
The market research firm expects India to post strong growth in the coming five years, surpassing Japan as the world’s third largest market. Sales in Japan are forecast to decline through 2017, a function of a shrinking population and falling motor vehicle exports.
Industry consolidation will be encouraged by the implementation of a tyre labelling scheme. Tyre labelling regulations will increase quality standards, making it more difficult for low-cost manufacturers to compete.
China’s tyre labelling programme will be introduced on a voluntary basis in 2017 and is expected to become mandatory in 2019.
Tyres account for around 70 percent of the natural rubber consumed worldwide in a typical year. As a result, growth in demand for tyres will provide a significant impetus for increased consumption of natural rubber.
“We do not expect major changes in the relative shares of synthetic and natural rubber in tyre production to occur through 2019,” Woo said.
While low oil prices do make synthetic rubber more attractive, the prices of natural and synthetic rubber tend to be linked.
“If price trends for both natural and synthetic rubber are similar, there is no major incentive to shift between these materials,” he felt.
“In addition, synthetic and natural rubber products are not perfect substitutes, and there are limitations to the ability of tyre manufacturers to replace natural rubber with synthetic rubber,” he pointed out.
The US will continue to be the world’s second largest national consumer of tyres, accounting for 13 percent of global demand in 2017, the research firm said.