Market Drivers: Opportunities & Barriers

4.1 Commercial vehicle tyre purchasers:

4.1.1 The demand for commercial vehicle retreaded tyres has remained reasonably buoyant and has sustained a consistent trend since 1995. Figures available for 1999 reveal that 2.6% of UK tyres sales for van and light truck and 37.2% of tyres purchased for Heavy Commercial Vehicles were retreads. In contrast, sales of retread tyres for cars have seen a sharp decline and only represent 5.6% of UK tyres sales for this sector (excluding imported casings). The relative dominance of retreads in the commercial vehicle sector highlights their importance in this market and the level of confidence that professional hauliers place on the quality of tyres and their longer-term durability.

4.1.2 The use of tyres in the commercial sector, including retreads, is governed by rational cost-benefit criteria at least by large fleet operators. Tyre performance is measured by p/km of operation and forms an integral component of all operating costs.
Retread tyres are also supplied to a number of other commercial sectors including light truck, bus and coach operators and dumper trucks. In each case retreaded tyres are used because they can match the specific demands of commercial operation. In certain cases the management of tyres from initial fitting to eventual replacement is contracted to a tyre supplier. This practice provides hauliers with a rationalised service which should further optimise the use of tyres including retreading.
Providing tyres can be adequately tracked this service provision may offer significant opportunities for retreading companies. Purchase decisions are already mature and (correctly) economically-based for commercial vehicle tyres, although there are still many smaller firms who procure new budget commercial vehicle tyres which are less able to be retreaded. This problem is one of education, and will probably be addressed by the increasing costs of tyre disposal in future.

4.2 Car Tyre purchases by Private Consumers:

4.2.1 Historically the main market advantage of retread tyres was their low purchase price. This has now changed as a result of improved production techniques, the movement of new tyre manufacturers to low cost countries, a world over-capacity for tyre production, and the weakness of the Euro compared to the pound over recent years, all of which have led to a collapse in new tyre prices.1
There are currently a number of good quality, low priced new tyres on the market of a similar price to equivalent retreads (although these may not give the same cost benefit over the retread). Consequently, this has had quite a significant effect on the market for retreads.1

4.2.2 This trend is clearly illustrated in Figure 2 which shows a fall in total UK annual car retreads production of 5.7 million units for the home and export markets since 1995. By 1999 retreads contributed only 8.4% of the car and 4x4 replacement tyre market (excluding imported retreads).

4.2.3 There may also be a geographical difference in the market, where tyre consumers in the North have a better impression of retreaded tyres and purchase accordingly. This may be due to the relative proximity of the existing large-scale tyre retreaders and word of mouth communication to convey a positive impression particularly on quality. Telephone surveys in three different English regions support this observation.

4.2.4 A sample of six independent and national tyre retail outlets in Oxfordshire were contacted to determine the price of new tyres and whether they supplied retreaded tyres. Prices were based on one tyre size (155/70TR13) and ranged from £18.40 to £23 per tyre (excluding VAT and fitting). The most expensive tyre quoted was £53. None of the businesses offered retreaded tyres for any brand of tyre. The general response to the question of retreads was to ask why customers would purchase a used tyre when a new one was available for the same price.

4.2.5 To obtain an alternative perspective two independent tyre dealers were contacted in Stoke and Middlesborough. Their attitude to the promotion and sale of retreaded tyres is in sharp contrast to the response from southern base tyre retailers. Firstly both dealers supply retreaded tyres for private cars as part of their product range. Retreaded tyres are offered for virtually all private vehicles and motor cycles at competitive prices to new tyres. The dealers also extolled the virtues of retreaded tyres, which are promoted as tyre brands as distinct from retreaded tyres. The obvious enthusiasm is largely because of confidence in the product, particularly quality backed by a guarantee, that can be sold at a competitive price.
The difference in regional attitude might be partly explained by differences in consumer attitude, notably price sensitivity. However, it might also be attributed to the approach of independent dealers who cultivate a loyal customer base through reliable service. Although this anecdotal evidence is limited it does demonstrate that retreaded tyres can effectively compete with new tyres when dealers offer informed guidance on the most appropriate tyre for each customer. This approach also helps to ensure that consumers get the best value from replacement tyres without having to understand detailed technical differences between different tyres.

4.3 Commercial Vehicle and Car Tyre purchases for Corporate Customers

4.3.1 For car tyres, the situation is much more complex and difficult to address. A large number of companies are now beginning to see the benefits, including good publicity and cost savings, that sound social and environmental performance can bring 3. In the UK this trend looks set to increase with the recent introduction of the first corporate responsibility index (IEMA, 2003)4.
As a result of these pressures businesses are likely to increasingly consider environmental and social issues in their purchasing decisions. Similarly for Government at a central and local level, purchasing of recycled products is being promoted.

4.3.2 In addressing their responsibilities, however, all procurers will be subject to economic and market constraints. In previous work, AEA Technology has found that the response may often be, "If it's cheaper, to the same quality, and the customer is happy, then yes we have a strong buy recycled first policy!".

4.3.3 Car tyres are particularly vulnerable in this respect as in the eyes of consumer purchasers they have question marks over quality (i.e. safety), and price. Consideration stops at this stage, and questions of fuel efficiency in service are not raised.

4.3.4 There is, however, some potential for retreaded car tyres to take advantage of developing attitudes towards corporate environmental benefits. In order to achieve this goal, however, the energy efficiency issue must be addressed.5 To be able to truly claim to be the best environmental option, therefore, retreaded tyres must have clear and irrefutable data on energy use through an entire life cycle. A major procurement contract for hire vehicles fitted with retreaded tyres could act as a case study to highlight the environmental and economic benefits of retreads and counter spurious perceptions of safety. In order to achieve this objective the data sets for demonstrating quality and in-use impacts (fuel efficiency) will have to be extremely solid.

4.3.5 Although commercial hire fleets may appear a good target for increasing the uptake of retreaded car tyres, the purchase decision can be complex. Vehicles rented under contract from an OEM, can be returned for retail resale. The vehicle specification must be maintained under contract, and the (admittedly few) replacement tyres which go onto these vehicles must be like-for-like. However, some companies accept branded remoulds on rear axles 6.
If retreaded tyres are used as replacements prior to a vehicle's return to the OEM for resale any retreaded tyres might have to be replaced with new, to avoid potential customer perceptions of retread quality being regarded as second best.

4.3.6 Ford Europe (in Germany) were formally approached for a view on how they purchase tyres for supply to bulk users of vehicles, but have not sent a reply to the internally-generated request for information which resulted from this approach. It is known that some manufacturers are introducing "greener" vehicles to demonstrate corporate values to certain segments of the private purchasing public. This may be a useful way in to the OEM market for retreaded tyres. It should be noted that, trailer OEM's have fitted remoulds at their customers request. However most fleet operators prefer new tyres as it contributes to the flow of casings needed to maintain a new and remould policy 6.

4.3.7 One market sector which falls between commercial fleets and private cars are black cabs. This class of taxis use car tyres which are governed by ECE 108 regulations, however, purchasing decisions are based on commercial criteria. Some black cabs favour the use of retread tyres because they offer the right properties of wear and durability but at a lower price compared with new tyres7. The supplier questioned claimed that 90% of his customers used them in some measure.

4.4 Government and Public Sector vehicles

4.4.1 Both national Government and local authorities control significant fleets of vehicles for delivering or enforcing public services. There are also a number of initiatives, for example, Agenda 21, which are raising the public profile of environmental awareness. These considerations consequently offer good opportunities to increase the use of both commercial vehicle and car retreads.
The challenge here is that most controllers of the purchasing process for passenger car tyres do not have retreaded tyres on their list of environmentally beneficial products. In addition, they are likely to wish to avoid the end customer image controversy by discounting retreads on grounds of safety (see earlier conversation with Government purchaser). Possible counters to this view are the positive attitude of government stakeholders in the US, where police vehicles and school buses run on retreaded tyres

4.4.2 Apart from passenger tyres, there are still many stakeholder purchasers who have not yet engaged with retreaded truck tyres in their commercial vehicle fleets. These include, in particular, the Ministry of Defence (MoD) who are large users of tyres. New tyre manufacturers, however, fight hard for MoD business, as it is a premium market, and they will invariably respond to current customer demand, which is driven by predetermined procurement specifications.
The MoD would appear to have an awareness problem, and is likely to have a skewed image of risk factors associated with retreads. The MoD must also consider the operational requirements for military equipment especially under harsh operational conditions, such as those experienced in the Middle East. It should be noted that the US military employs retreads on all combat and combat support vehicles, and in this country the USAF runs retreads on airfield vehicles. This may be useful information for stimulating this stakeholder into action

4.5 Conclusions:

4.7 References:

1. Used Tyre Working Group 2001, Fifth Annual Report of the UTWG. UTWG
2. Environment Agency 1998 Tyres in the Environment. Environment Agency
3. Elkington (1996) Cannibals with Forks - Triple Bottom Line for the 21st Century
4. IEMA (2003) Business in the Community Launch CSR Index. [http://www.iema.net/article.php?sid=2470]
5. BLIC European Association of the Rubber Industry 2001. Life Cycle Assessment of an Average European Car Tyre. BLIC
6. RMA reference
7. Jetyres, London, conversation, April 2003