The tyre industry in Africa has its unique features. This article will focus on three paradoxes that represent the heart of the African experience Vis a Vis the European and Asian ones.

In Kenya, for example, 80% of the passenger and 4x4 vehicles are second-hand imports from markets such as Japan, Singapore and United Arab Emirates and the United Kingdom. Averaging 16,846 car registrations for the years 2006 to the present, it follows that most of the neighbouring countries of Tanzania, Uganda, Rwanda, Burundi and Ethiopia do not fall too far for the apple tree (Kenya). As a Field Engineer with Michelin tyres, I had the chance to work in these countries. Kenya is Africa’s third largest economy after Nigeria and South Africa.

Paradox of Better roads, hence Softer tyres

“They don’t build them as they used to” is a lamentation that we often year from seasoned tyre-men and transporters. From 3500 BC, the time it is assumed that wheels were invented to the present age, road transportation, the wheel and road surfaces have had a tandem match. From the Harappan roads to the Autobahns, from trade routes to multi-storied roads, great strides in mobility had not evolved at the same pace throughout the globe and evidently at a much slower rate in Africa. Tyre Evolution here is slower than it looks, but faster than you may think.

Part of my work as a Field Engineer means that I have to report on the comparable factual tyre performances collected over lengthy periods of time.  Initially on European tyres and retreads which dominated the scene and more recently on Asian tyres and tread bands (Also known as budget brands). Gaps in mileages, prices, CPK (Cost per Kilometer) were narrowed by emerging brands, Seasonality of the roads, changing of routes and business evolutions.

Seeking to protect the brands I worked for, I would painstakingly request for tyre designers and quality directors not to change the patterns and designs. Maintain the status quo!! At least for this market. It works for us. Some of these new generation designer tyres have not been a match to the stubborn, rugged and ill-formed roads and routes here.

Paradox of Data Availability: Scarcity in abundance

Welcome to downtown Kirinyaga Road in Nairobi. We have all brands of tyres you want, DOT is not a requirement, we will hammer the tyres in the bead while fitting them, balanced or not, the tyres will still run and vehicle alignment is up to you. What we promise you is the best prices in the market.

After doing a day-long study with a senior vice president (of a multinational tyre company) in this expansive market that is responsible for 60 % of tyres used in Kenya, only on word came to his mind – INEFFICIENCY.  Having spent a whole day speaking to various multi-millionaire tyre owners, he was unable to conjure up a marketing model, prepare forecasts, and have supporting data from any national or international body on the accuracy of data on tyres. In short, the models of business are un-modelled.

The owner could be the tyre fitter, director to receptionist or cashier, these models continue to support tyre sales in millions even in dollar terms. Gray market or not, they are key to understanding customer preferences in the whole of the East African region. Akin to the “Bengali” tyre shops (as they are called in the United Arab Emirates), these shops are a notch lower. Due to the gaps in the government enforcement of law, due to the fact that they get far lesser marketing support from suppliers compared to their European and Asian compatriots. This maybe also as a result of the numerous speculative brief-case transactions of wealthy business men. It does not help that none of these East African countries has anti-dumping laws or a tyre disposal tax.

From tyre importer to distributor to warehouse agent to dealer to retailer is how it would appear on a Philip Kotler’s “Principles of Marketing Book” to an MBA student. On the ground, however, the reality is different. Porous borders, corrupt officials, lack of reliable data makes it difficult to model products for markets or vice versa.

The paradox of the customer: Informed customer buys more

In reality, an informed customer ought to buy less tyres especially when buying tyres for a fleet. About 70% of the cost of building a new premium tyre is ensuring that a durable, re-usable, re-groovable, retreadable, repairable casing is produced to withstand all the rigors that come with our roads and practices. The availability of data influences its usage. The quality of what is available naturally influences the quality of decisions.  Twenty years and counting in the tyre industry, I have seen many transport companies form and fold. While there are several reasons for closure, the fleet tyre quality is not only indicative of the general well- being of the fleet but as a causation.

Eager, up-coming transport directors start with premium tyres, proper tyre husbandry, and tyre management contracts. Subsequently, these directors grow weary of listening to tyre suppliers and want to do it as “Stand alone cow-boys.” Spoilt for choice and armed with a know it all attitude, vast choice of brands, special offers the director is now only guided by the size of the budget than the urgency of the work. They progressively and gradually slide down the tyre tiers (ranks). Then the road calls, delays, accidents, frequent break downs, blame game (drivers and owners), higher fuel costs and the unstoppable decline sets in. There is an African saying here – “ Mganga haji ganguwi” – Medicine man does not cure himself.

“My drivers don’t care about the quality of tyres they use; potholes have no preferences, they damage premium and budget tyres in the same fashion; if I lose one premium, it is equivalent to losing three budget tyres. It is therefore better to fit budget tyres.” These are narratives that often meet sales pitches of premium tyre sales persons. Few companies in this region have retaliated by offering Tyre Insurance schemes at a premium and Tyre Damage Warranties. Not an informed customer but peeled ears and eternal vigilance is the game changer in tyres. With cheaper brands comes less vigilance not just from the end-users but also the manufacturers. This should not be the case on the only safety equipment in the vehicle – TYRES.

As a student footballer at Jabalpur’s Rani Durgavati University in the 1990’s, I often woke up in at 4 am to exercise on the steep steps of a temple at Gwarighat on the banks of the Narmada River in India. Even at the wee hours of the morning I would encounter truck drivers washing their vehicles, burning incense (Agarbhatti) and saying prayers. Inscribed on some of these vehicles were the words “ WORK IS WORSHIP” This deep reverence for work and their instruments (the trucks) was inevitably extended to their tyres. The kind of reverence I hope to rub into and teach some of our “informed” African truck drivers and owners.

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.

Comments (0)

ADD COMMENT

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.