By Sharad Matade

After having over 35 years of successful performance in C suite roles in four continents, Minardi leads a global consulting practice that supports CEOs and mentors leaders that need to reshape business and organisations. In his view, new strategic thinking is required to create value given the simultaneous shift in paradigms provoked by technologies, social and generational trends. On the tyre business space, the ex-senior official of Bridgestone says, emerging tyre companies have grown fundamentally by implementing a low-cost model while copying the leading tyre companies’ practices established for years. “Meanwhile, market leaders are investing in new technologies to business models. He stresses the need for emerging players to re-define their role in the marketplace.

How would you differentiate future mobility for developed and developing markets as the growth drivers and influential determinants are different for both markets?

 The transition from the current model to a future mobility model will take time. It will also have different characteristics and speeds in mature and emerging markets and in large urban cities versus rural areas. This is particularly important for countries like India with such vast territory.

What I usually describe is my understanding of the future mobility model in large mature urban cities. Given the specifics of each country or region, you could infer the evolution of that market.

For sure “hard” changes, like the adoption of EVs, are going to take longer in rural areas but might be sooner than expected in large cities. Emerging markets that are lacking infrastructure could find it easier to move on those mature countries that need to change the culture and scrap old infrastructure.

In any case, I anticipate “soft” changes, like the adoption of digital solutions, will expand very quickly in all markets, including India. The speed will be determined by the ability to innovate and the expansion of broadband internet and intelligent mobile devices.

We see many disruptive technologies innovated in Europe being adopted in developing countries in the local context. Do you agree to this? Do you think this attitude or strategy will sustain in the long term, or emerging countries need to be more innovative for future mobility?

Emerging countries have shown the ability to create mobility solutions in response to their own restrictions and needs. The BRT (Bus Rapid Transit) solution is just an example.

I estimate there will be a mix of innovative solutions together with the adoption of good practices from mature markets. Like I said before, I see a fast growth of digital startups playing a role in the customer inter-facing sphere.  But one model will not fit all as the “emerging market” category is quite heterogeneous.

In developing countries, new mobility has been primarily supported by government incentives. But for the long term, do you think that the automotive players in developing or emerging markets need to change the attitude and strategy to lessen the dependency on government incentives?

Government incentives are needed when the model they pursue does not have the scale to be sustainable or the technology is immature. At the same time, when we mention incentives, we should consider not only “benefits” for the consumers to adopt a certain type of vehicle but “penalties” to the producing companies for not delivering on the CO2 emission reduction, for instance.

Once the market reaches the point it has “critical mass” the incentives will be less critical. Tesla is about to demonstrate EV vehicle production can be profitable at a certain scale. That is going to set up a new paradigm for the whole vehicle industry.

In Emerging markets, we are also witnessing that hundreds of new startups coming in the electric vehicle space and competing with the well-established players. What advice do you offer to such startup founders?

 Eduardo Minardi: This situation is taking place in many different industries and markets, not only mobility related. Take, for instance, the beer industry with the disruptive growth of artisanal beer companies. They have created new concepts, new products and even new ways of producing and commercialising them. Large companies have put an eye on the newcomers and made acquisitions and/or JVs. I would encourage the startups in the mobility arena to keep innovating and challenging the status quo. Some will fail, but the prevailing ones will have an impact on human mobility and will be rewarded for that.

Q) What overall impact do you expect on the tyre companies in emerging markets due to CASE?

 Eduardo Minardi: The new mobility models in the emerging markets will take longer to displace the traditional tyre business. So, tyre companies can keep producing and serving the market as they do it today. But this will only provide some time to the tyre companies to innovate and adjust their models. Otherwise, they will fall behind and will not be able to compete.

Q) Asian tyre companies are expanding their businesses in Europe, citing better margins and proximity to technologically advanced players. How do you see their future? At the same time, which kind of tyre companies, according to you, will sustain in the future mobility as due to the megatrends the entire supply chain, production and business practices will change.

 Eduardo Minardi: Emerging tyre companies have grown fundamentally by implementing a low-cost model while copying the leading tyre companies practices established for years. They are getting closer and closer in terms of quality and performance and settling in mature markets. But this is taking place at the time leading tyre companies are moving into new territories actively by participating in the design of future mobility solutions, shortening the R&D process by introducing digital simulations and A/I, creating smart and connected tyres that suit the performance of the new mobility requirements, digitalising the entire value-chain, including manufacturing processes, serving the market through a strong (and in many cases owned) retail network and having invested heavily in on-line and digital marketing. From there, you can see how limited the “copy and paste” model is. I think emerging tyre companies will have to revisit in which market they are, which role do they want to play in the new mobility arena, who their customers will be and how they will serve them, etc. I don’t say it will be easy, but absolutely possible for the Asian tyre companies to expand their business if they go through a profound debate to re-define their role in the marketplace.

Bridgestone Americas announced the launch of Firestone Direct mobile vehicle service for car owners and fleet operators. Firestone Direct brings Bridgestone’s automotive services directly to vehicle owners’ homes or workplaces to offer maximum convenience with safe, contact-free service.

This service uses specially equipped vans operated by certified technicians to perform a wide range of maintenance services, including fluid and filter changes, tire repair and replacement, battery check and replacement, and more. 

Through 2021, Firestone Direct will continue to grow into additional markets across the southeastern U.S., with plans to expand nationwide by 2023. The new service launched first in Nashville and Atlanta and expanded into Orlando and Tampa in March.

Angie Oleson, director of Firestone Direct, said, “Customers are increasingly turning to online shopping and at-home services for convenience and safety, and Firestone Direct is at the forefront of this movement for at-home car care. By bringing trusted vehicle care featuring the latest automotive technologies directly to the customer, Firestone Direct can leverage the expertise of our trained technicians with the ease of online booking and at-home service for maximum convenience.” (TT)

The global electric vehicle (EV) market has taken a tremendous leap forward, with new registrations reaching record market shares in nearly all countries. For the tyre development landscape, the accelerating growth of the EV market means a pervasive transformation.

Boosting circular economy

At Black Donuts, the impact of the EV trend can be seen everywhere, from the tyre designers’ desks to the new practices of tyre testing. Beyond meeting new demands of the EV sector, the procedures and practices are tuned to serve the company’s strategic goal: to spearhead the industry’s shift towards a circular economy.

Black Donuts launched the first EV tyre development projects with its tyre manufacturer customers in 2018. The internal research on EV tyres was initiated even before, at the time of the first EVs entering the market. “The first research project addressed the primary technological challenges: rolling resistance and noise,” says lkka Lehtoranta, Head of Tire and Material Development at Black Donuts.

In tyre design, it is essential to focus on specific aspects to ensure optimal performance for electric cars. Compared to combustion cars, tyres for Evs must carry a heavier load withstand high instant torque – and be efficient and quiet. 

Lately, the focus on tyre technology has shifted towards more comprehensive sustainability. Bio-based materials and compounds are opening new possibilities, and the rapid growth of the EV market accelerates the pace of development. ”The EV trend has highlighted the sustainability of tyres. The demand for bio-based materials and tyre recyclability has significantly increased,” says Jarkko Mällinen, Technology Development Manager of Black Donuts.

In cooperation with its partners, Black Donuts is investigating new possibilities to replace fossil-fuel-based raw materials with bio-based or renewable materials in all products, including studded tyres. The company is currently testing the use of bio-based plastics in stud bodies.

Also, end-of-life tyres are a hot topic in the industry, and Black Donuts is researching how the waste tyres can be recirculated and recycled back into the process. Even the tyre development process is undergoing a renaissance. New design tools for faster tyre development are being introduced, emphasising the key features of sustainable, future proof tyres.

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European PCLT (passenger car and light truck) tyre manufacturing capacity has risen over the past decade to meet increased demand, but there has been a major shift from plants in Western Europe, towards Central Europe and Russia. The move eastwards reflects substantial differences in operating costs between the two regions, specifically in terms of labour costs. Hourly labour rates in Central and Eastern Europe can typically be half to one quarter of those in the highest cost Western European countries. In particular this significant differential has resulted in the transfer of production of lower priced non-premium tyres to larger plants in Central and Eastern Europe. Numerous PCLT plant closures and downsizings in Western Europe have either been announced or enacted during the past 18 months.

In 2019 Cooper Tires ended PCLT tyre production at its small plant in the UK, and Michelin recently closed the PCLT tyre plant in Dundee that manufactured tier-1 brand tyres in lower rim-diameters (≤16”), a shrinking segment of the European market. These closures leave just the two PCLT tyre facilities operating in the country: the Pirelli plants that focus on low volume but high-margin premium tyres.

In Germany, Michelin has announced plans to close its Bamburg plant that also focused on lower-rim -diameter tyres, whilst Goodyear is restructuring operations at its PCLT tyre facilities located in Fulda and Hanau. Total capacity there will fall, but there will be an increase in production of premium tyres.

Pirelli has recently ceased production of car tyres at its Bollate plant in Italy, its only facility in Western or Central Europe that was manufacturing non-premium car tyres. Apollo Tyres plans to downsize PCLT capacity at its plant in the high-cost Netherlands, focusing the facility on high value tyres with short production runs. Management had stated that the company lost money on 70% of the PCLT tyres that it sold from the facility.

Despite these closures in Western Europe, expansion to the east is expected to result in the net addition of 30 million units of PCLT tyre capacity across Europe* by 2026. New plants that have been recently opened, or are currently under construction, are located in either central and eastern Europe or Russia. In 2017, Apollo Tyres opened a greenfield plant in Hungary, with first-phase capacity increasing to 5.5 million PCLT tyres and almost 0.7 million TBR tyres. Supply from the facility has substituted imports from India and now permits the planned downsizing and specialisation of production in the Netherlands.

In 2018, Hankook announced plans to add production of TBR tyres at its plant in Hungary, however this expansion was put on hold in late 2019. In phases, the company has already expanded PCLT tyre capacity until it is now one of the largest such facilities in the world. Meanwhile, Nexen has begun the ramp-up of capacity at its new plant in the Czech Republic; this will have added substantially to the country’s capacity by 2023.

In addition to further investments across Central and Eastern Europe by Continental Tire, Bridgestone and Pirelli, an expansion of premium tyre capacity in Slovenia has also been announced by Goodyear.

In mid-2019 Toyo Tire announced its intention to build a new tyre plant in Serbia, consolidating the country’s position as the leading location for new PCLT tyre manufacturing capacity in Europe. This follows Linglong’s decision to build its new European plant in the country and Cooper Tire’s plan to double the size of its facility. Based on analysis by Astutus Research of all announced capacity actions (plant opening and expansion net of closures and downsizing), Serbia will account for over 40% of planned capacity additions between 2019 and 2026.

Toyo expects to invest €390 million in its new facility that will have a capacity of 5 million units. It intends to start production in early 2022 and reach full capacity the following summer. Linglong’s facility will have a capacity of 12 million PCLT tyres, alongside truck and radial agricultural tyres, built in three phases and representing a total investment of over €800 million.

Serbia as new hub

Although there is demand for both replacement and original equipment PCLT tyres in Serbia, the domestic market is amongst the smallest in Europe and production will be export focused. The country has already emerged as a key source of budget tyres to the European Union and to Russia, predominantly from Tigar Tyre, Michelin’s low-cost tyre subsidiary, that has significantly increased capacity and production in the past decade.

Geographically, Serbia is well located to supply the major markets of the EU and Russia, and benefits from free trade agreements with both. Labour costs in the country are significantly lower than in the Czech Republic or Hungary, and labour availability is good, with a higher rate of unemployment.

At present Toyo imports tyres to Europe from its facilities in Japan and Malaysia; Linglong utilises its PCLT tyre plants in China and Thailand. Both companies aim to develop their presence in Europe, and local production should help them in this quest, particularly in the original equipment segment where the significantly shorter lead times will improve the competitiveness of their offer. Similarly, the opportunity to increase their share of the OE business was one of the motivations for Nexen and Apollo to replace imports to open a plant in the region.

Whilst the influence of the Covid-19 virus may slow the pace of some planned investment in central and eastern Europe, it has already accelerated the pace of closures in the west. Furthermore, we expect that it will result in further plant closures there, as the decline in European tyre demand dramatically reduces plant utilisation rates.

*Europe refers to Western, Central and Eastern Europe, including Russia and CIS, but excludes Turkey which we include in the Middle East & Africa region.

For capacity data: ‘Western Europe’ includes plants in Germany, France, Spain, Italy, the UK, Portugal, the Netherlands, Finland and Luxembourg. ‘Central Europe’ refers to Poland, Romania, Hungary, Czech Republic, Serbia, Slovakia and Slovenia. ‘Russia and CIS’ refers to Russia, Ukraine, Belarus and Uzbekistan.

• Simon Hodson is Research Director at Astutus Research shodson@astutusresearch.com

The WHO has said that the outbreak is now officially a Pandemic. People/ companies/ organisations are still coming to grips on how to address the situation. Government heads of various countries are trying to curb the situation by restricting entries of people who are affected by countries that are affected the most. Thus, airlines would have only diplomats and other certain levels of people allowed to fly.  Many airlines have suspended a good number of their flights.  Many companies will be looking to take a hair cut on what they take back with them, just to see that business can be sustained during the trying situations. 

The virus has led various markets to crash, courier services have been curtailed in certain countries. All types of cancellations, be it sport, expositions or business, have affected the business world over. The transaction value in the losses may be difficult to gauge currently, however, it could be in the millions. Contracts would have to be reworked, and companies may have to come with new strategies. 

However, in every situation, there would be also a business opportunity, if you work your strategy right. The sale of masks, gloves, hand sanitisers, medical devices would be able to generate good business. Though it is seen that the outbreak is from China, you also got to give to them as to how they are trying to contain the situation by building hospital/s within 10 days. In other countries, this would easily have taken a much longer time period. 

It is a given that the business scenario is not going to be the best for most of the companies; Therefore, companies may have to think and reevaluate the way they are currently running their company. Companies will look to get leaner in every possible way. Cut down on unwanted expenses. Many companies have started asking their employees to work from home. Some may look to have lesser number of people and look to automate some of the work, especially in the factories.  Commercial properties being an expensive asset to maintain, some companies may look to perhaps go on rented co working spaces. Use less of one time use items like plastic and use more renewable/ reusable substitutes. Use of more environment friendly methods going forward will be the mantra. 

This hit on our social system in a way will make us pause, think and have better suggestions as to how to look after ourselves and our environment at large.