New data from Astutus Research* quantifies tire manufacturers’ loss in revenues from vehicle producers, with North America the hardest hit
Potential demand for new cars has made a surprisingly strong recovery following the precipitous declines in 2020. Government policies have supported incomes in many markets and the predicted large scale increases in unemployment have not materialised. Furthermore, as some commuters have attempted to avoid public transport because of safety concerns, car-usage has recovered far faster than demand for public transport.
New car sales have in fact been limited by supply rather than demand. A shortage of components, particularly semi-conductors, has reverberated through the automotive sector. Vehicle manufacturers have had to reduce shifts and idle plants resulting in a significant loss in vehicle production. The impact was felt particularly sharply in the third quarter of 2021, but it is expected to continue well into 2022. A rebound in vehicle production and sales is expected from 2023 to 2025, based on the release of pent-up demand, positively affecting the OE tire segment.
This year, however, the result has been lower than expected original equipment passenger car and light truck (PCLT) tire sales. According to new data from Astutus Research this will represent a loss in revenues of over US$2 billion for the global tire manufacturers. North America accounts for the largest share of this lost value – reflecting both the significant disruption to vehicle production, and the high average price of tires compared to other world regions. This is a result of the mix effect, with a far greater share of high rim diameter tires. Europe accounts for almost 30% of the lost value globally, with a further 27% in the Asia Pacific region. The low share of lost revenues in South America and the Middle East Africa region is a result of the lower volumes of vehicle assembled in these regions, combined with lower tire average selling prices.
A recovery in light vehicle production from 2022 (and particularly 2023 and beyond), when combined with a positive mix effect, should give a substantial boost to OE tire revenues over the next few years.
*Findings are taken from the report "Global Original Equipment PCLT Tire Demand Forecasts" published by Astutus Research in December 2021.