Future Trends of the New Tyre Industry and the Retreading Industry in South East Asia

By David Wilson: Publisher, The Tyreman

The last two years have been difficult times for the world economy and the tyre market has certainly not escaped its fair share of difficulties. Indeed, having experience of running publishing companies in both Europe and Asia, it seems to me that businessmen in South East Asia have responded with particular caution to the economic situation, perhaps as a response to having experienced the 1997 Asian Economic Crisis.

In principle, however, the Malaysian tyre sector should have a buoyant future as Malaysia, along with Indonesia, is one of the fastest growing countries in South East Asia.
 

Passenger Car Tyres

The passenger car tyre market in Malaysia is divided into two segments - OE and the replacement market. The Malaysian OE market is worth about 3 million tyres per year, and replacement market is about 7 million tyres per year.

With AFTA now being fully implemented, and with car tyres from Indonesia, Malaysia, Thailand and Vietnam now flowing freely through ASEAN markets, we are now seeing a proliferation of brands in the region - both manufacturers' brands (major brands) as well as private brands.

However, the imposition by the USA of an additional 35% import tax on Chinese made car tyres is resulting in Chinese manufacturers switching their export routes from the US to Asia, with the result that 30-40 additional Chinese tyre brands are also finding their way into Malaysia as well as other SEA markets. It is likely that it will take up to 5 years for it to become clear to consumers which brands are of acceptable quality. In the meantime, however, the market is in a state of flux, with confusion for consumers as they struggle to understand which tyre brands to buy.

Under the circumstances, it is important for tyre dealers to align themselves with reputable new tyre manufacturers and suppliers and to choose brands that are likely to stay in the market rather than selling brands that are likely to disappear.

In the meantime, tyre manufacturers and major wholesalers are now promoting multi brand retail concepts, which allow consumers the freedom to choose brands that they prefer. Examples of this are the Kit Loong Tayaria alliance and Michelin Tyreplus. The Kit Loong Tayaria alliance is a particularly forward looking chain in that it is a true multi-brand chain store which focuses on the requirements of consumers rather than on the need to promote a specific brand. Dealers who subscribe to the Tayaria Alliance partnership are free to trade and display more than 10 brands that Kit Loong distributes.

With these conflicting trends in the tyre market we are now beginning to see a polarization in car tyre sales with both branded and budget tyres selling more, whilst those brands in the middle are being squeezed.
 

Truck Tyres

The truck tyre market also promises to show exciting developments in the years to come. Radialization now stands at about 65-70% and we are now beginning to see some interesting trends in terms of tyre sizes. For example, we are now beginning to see super-single tyres in Malaysia with the introduction of 455/55/R22.5 tyres on Exxon Mobile oil tankers.

We can certainly expect the ASEAN market to grow strongly in the next 10 years with increasing goods and services leading to the rapid development of the transport industry in those countries. That being the case, we can expect the truck tyre market to exhibit high demand patterns in the medium term.

Truck distribution and servicing in Malaysia is not as well developed as the passenger car network. However, in the future we can expect to see more and more new modern truck centres providing more professional services. This trend already starting, and will continue. If the leading players in the market want to tap the growth opportunities, they will need to equip their tyre service centres, and most importantly create a service mindset to provide professional tyre services to fleet owners. 
 

Retreading

The prospects for the retreading industry are perhaps not so good. The volume is expected to decrease with the continued radialization of the buyer market. This can only change with the development of whole life tyre management concepts that include retreading as an integral parts Despite the pessimistic viewpoint held by some, this trend is rapidly balanced up by a fast growing transport industry which is fitting more tyres, a trend which is expected to be maintained for the next 2-3 years.

In Europe the new tyre manufacturers are heavily involved in retreading although in Malaysia, this is restricted to Michelin and Bridgestone. The latter is currently more aggressive as it is now concentrating on developing the Bandag network to support their tyre distributors. We have seen new Bandag franchises in Indonesia and Thailand and we must expect Malaysia and Singapore to follow soon. This will certainly present a threat to existing retreaders in Malaysia and may lead to a period of instability and consolidation. Existing players who wish to compete must continue to invest, improve in product quality and customer service.

Despite this, quality standards continue to rise in retreading, aided by the growth in popularity of shearography as well as the implementation of the MS 224 standard.