Mobility mega-trends support sustained demand for tyres in Europe

Mobility mega-trends support sustained demand for tyres in Europe
  • Both original equipment and replacement tyre demand in Europe are expected to continue to increase, despite disruption in the personal mobility market
  • Tyre volumes are forecast to grow fastest in Central Europe and Russia & CIS, with slower growth in the largest Western European markets
  • Rapid development of ‘shared’ mobility (car-sharing and ride-hailing) has the potential to disrupt the tyre industry, with the growth of large fleets

By Simon Hodson*

Over the next five years, the European (Europe refers to Western, Central and Eastern Europe, including Russia & CIS, but excludes Turkey which we include in the Middle East & Africa region) passenger car and light truck (PCLT) tyre market is forecast to grow by around 40 million units, reaching a total of 480 million tyres in 2023 (original equipment and replacement segments combined). The market is expected to be held back by declines in the OE market in 2019, before returning to growth over the rest of the period.

The volume of PCLT tyres sold in Western Europe is expected to be relatively static over the period, with little growth in either vehicle assembly (OE demand) or the car parc (RE demand). Central Europe is forecast to see a more substantial increase (average annual growth of +2.8%), partly due to vehicle manufacturers shifting car production to the region to take advantage of lower labour costs. The fastest regional growth, however, is expected in Russia & the CIS, which will see a continuation of the ongoing recovery from the sharp declines of 2015 and 2016.

The ultimate determinant of demand for car tyres is aggregate demand for personal mobility, itself a function of demographic trends and economic activity. Whilst the population of Europe has risen by just 3% in total since 2000, demand for mobility has grown at a significantly faster pace, with passenger car ‘vehicle kilometers travelled’ [the aggregate distance travelled by all passenger cars] increasing by almost a quarter in the same period.

This increased demand for mobility has resulted in steady growth in the European car parc (vehicles in operation, or VIO), and rising incomes have resulted in an increase in vehicle density (cars per 1,000 people). In total the car parc has grown by 45% since 2000.

The faster growth in parc has resulted in a long term decline in the average intensity of vehicle usage. Across Europe as whole, average annual kilometers traveled per car are around 15% less than in 2000.

Economic and demographic trends are expected to remain broadly supportive for continued growth in demand in personal mobility. In the longer term, however, there are expected to be fundamental shifts in how this demand is satisfied.

Although there will be significant variations across geographies, influenced by differences in economic prospects and demography (population growth rates and population density), there are four commonly referenced mega-trends that will impact on future demand. Personal mobility will be increasingly Connected, Autonomous, Shared and Electric (CASE).

Under the influence of these mega-trends we expect there to be a reversal in the historic long term trend of growth in car parc and decline in average kilometers travelled per vehicle.

  • Whilst aggregate demand for mobility will continue to increase, a shift from ‘pay to own’ to ‘pay to use’ should result in lower personal car ownership rates, and the growth of ‘mobility as a service’ (MaaS).
  • This will result in growth in shared mobility fleets, including rental, car-share and ride hailing vehicles.
  • Whilst the total number of vehicles in operation is expected to decline in the longer term (from the latter half of the 2020s), vehicles will be used more intensively and average annual vehicle kilometers will rise.
  • More intensive vehicle ownership would likely reverse the current trend of vehicles being replaced less frequently. A decline in the car parc therefore does not necessarily imply a decline in new vehicle sales.
  • The trend towards shared mobility is likely to accelerate once autonomous vehicles become more widespread, with the concept of robotaxis.

Shift in demand

Increased vehicle usage will sustain growth in demand for tyres in both the near term and longer term, despite a projected reduction in the total car parc. Nevertheless, over time these mega-trends have the potential to disrupt the tyre industry, with a shift in demand from private consumers towards concentration in a number of large fleets.

Shared-vehicle kilometers (both car sharing and ride hailing) still account for a small proportion of total vehicle kilometers travelled in Europe. This is expected to change significantly in the next couple of decades, however, with increased demand and much more comprehensive service provision.

Although offering great promise, the difficulties of the car sharing and ride-hailing businesses are also clear. The pioneering Autolib’ car sharing scheme in Paris closed during 2018 as a result of financial pressures, and most schemes require continued investment from their parent organisations. Similarly, despite its size, ride-hailing leader Uber remains loss-making, as is its Russian partner Yandex.Taxi.

Demand from corporate fleets already accounts for a fifth of the European replacement tyre market; furthermore fleet demand is set to grow at double the pace of the total replacement market between 2018 and 2023. The leading tyre manufacturers have well established operations catering to demand from fleets in Europe, but much of their recent corporate activity (acquisition of tyre retailers & distributors and fleet telematics providers) can be seen in the context of preparing for these more fundamental shifts in the market.


About The Author

Leave a reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest Issue

Newsletter Subscription

Recent Tweets

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!