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Far From Running-Flat: Run-Flats’ Aftermarket Position Growing Rapidly

(Clacton, U.K./Tyres & Accessories) So far the growth of run-flat tyre sales has been almost exclusively through OE business.

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As the replacement market becomes more and more visible, Tyres & Accessories took the opportunity to ask Goodyear Dunlop U.K. managing director Dick Johnson; Michelin’s Technology Centre Europe director Bernard Delmas; and Bridgestone U.K. marketing manager Andy Lane, for a deeper insight in the development of the run-flat aftermarket.

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Last month Bridgestone Corp. announced that it had shipped its three-millionth run-flat tyre in total. At the same time the U.K. wing of the multi-national manufacturer said its run-flat sales boomed in 2005. While 3 million run-flats may sound like a lot of tyres, speaking to other manufacturers puts the Japanese company’s figures into context. Bernard Delmas, director of Michelin’s Technology Centre Europe, described the segment as a “fledgling market” which equated to 1% of 300 million, in terms of the total European OE market.

According to T&A estimates, the overall U.K. run-flat replacement market more than doubled in 2005, growing by approximately 218% compared with the previous year. This is in line with the Western European growth rate of 222%. Bridgestone executives are confident that both the general market and its sales will increase further in 2006.

Both Michelin and Goodyear Dunlop U.K. refused to reveal specific “per market” figures, but Goodyear representatives told Tyres & Accessories that the company sold 1.3 million fail-safe tyres globally in 2004 alone. In 2005 this is expected to be nearer 2 million.

“Bearing in mind we have been supplying since 1993, and since 2001 most of our business has been in Europe rather than the U.S., you can see the growth pattern,” a Goodyear spokesman told Tyres & Accessories.

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Bridgestone told T&A it consistently outperformed the market in 2005 and achieved a 465% increase in RFT sales in the first nine months of 200. This certainly appears impressive, however it is worth remembering that all the main players’ replacement sales volumes are relatively low. In unit terms the total 2005 U.K. run-flat replacement market totalled 123,672 units, according to Europool figures.

“Our RFT sales figures for 2005 are very encouraging and show how the technology is becoming increasingly popular on new cars sold in the U.K.,” said Andy Lane, marketing manager at Bridgestone U.K. “In time, we believe the tyres will become a standard fitment on most new cars – including 4×4 vehicles.”

Despite stiff competition from the other leading manufacturers, Michelin continues to see itself as a pioneer in this field. “We are the only tyre manufacturer who is present on the market with both PAX technology and self-supporting tyres (Michelin ZP). The take-up rate is different for each solution, as each technology has a different level of maturity and each requires different levels of vehicle adaptation to fully utilise the technology and reduce trade-offs,” Demas commented.

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According to Bridgestone’s Lane, for now at least, OE fitment remains the most important route for increasing the number of run-flat tyres sold in the U.K.  “Aftermarket sales of run-flat tyres are naturally going to take time to catch up to original equipment sales, and it is important that tyre manufacturers educate consumers about the need to swap their worn tyres with like-for-like replacements. This is a very important message to give people who are considering fitting standard tyres on a car designed for run-flat tyres – and crucial a one when it’s the other way around,” Lane added.

Bridgestone has already made in-roads in this respect, having published a series of advertorials in consumer car magazines during 2005 explaining why drivers should fit the same tyres as the OE fitment. “We hope these educational messages will help drive sales of run-flat tyres in the aftermarket,” Bridgestone’s marketing manager commented.

Goodyear Dunlop has also invested large amounts in raising the profile of its RunOnFlat technology. T&A asked Johnson how consumers had responded to this. “Very good. We realise that this is still a niche product in terms of sales, but like airbags and ABS a decade ago it is important for the technology leader in a vehicle safety or innovation sector to communicate the product benefits. Our campaign is directed at communicating our technology leadership in RunOnFlat and relating it to the increasing fear motorists have of being stranded.”

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The question of cost

OE fitments and publicity are only part of the answer. And PR alone is unlikely to convince large volumes of drivers that they actually want to pay-out the prices that premium run-flats are currently commanding. Those involved in the OE business have pre-empted this hesitance by issuing advice that the best performance will only be obtained by replacing run-flats like-for-like, in terms of brand and even pattern. Some manufacturers have even suggested consumers should buy run-flats in sets of four. But won’t consumers be scared off by the price?

Last summer, JD Power and Associates questioned 17,000 U.S. consumers about which automotive emerging technologies were most appealing to them. The study found that safety related technologies continue to draw strong consumer interest. Despite this, realistic price levels were found to significantly dampen consumer enthusiasm about run-flats.

The JD Power research found that the four most desired items all relate to enhancing the safety and/or security of vehicle occupants. Run-flat tyres – no-doubt to the delight of the manufacturers – were rated as the most interesting product for consumers. According to the research, 81% of respondents said they were “probably interested.” 24% said they were definitely interested – that was until the price was revealed.

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When the respondents were made aware of the price, run-flats became only their fourth priority with stability controls, keyless entry systems and high definition audio products all overtaking the tyres. Vehicle compatibility aside, price, it seems, is the biggest barrier preventing the “probably interested” respondents from becoming customers.

The thing is consumers can’t easily downgrade. Something the manufacturers do appear to agree on is the retro-fitment of run-flats. Due to the fact that run-flat tyres need to be fitted to cars with the appropriate suspension and TPMS to feel their real benefits, it is not recommended to fit such tyres on a non-adapted car. One might have thought that this provides a good opportunity for the so-called second line manufacturers who all seem to have run-flats of their own waiting in the wings.

So does the thought of companies like Kumho (with its KU31 Mini-compatible run-flat replacement tyre) and Marangoni (with its as-yet unnamed run-flat set to be launched later this year) scare the bigger manufacturers?

In a word no. All the manufacturers T&A spoke to remain unconcerned about losing any significant replacement market share to the lower priced alternatives. Besides, the consensus is that the leading companies will begin to lower their prices during the course of the year.

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Michelin’s response was typical: “The quality differences between standard premium tyres and low price ones is recognised by the end-user. There is no doubt the same story with run-flat tyres.” Referring to the JD Power research, Delmas commented: “As with most “safety” options on a vehicle, the layperson expects these to be standard and prefers to spend their money on options that provide increased pleasure or convenience. Thus, demand decreases as the price goes up. Frankly, the market has not yet given its verdict on the acceptability of current run-flat offers in terms of cost and performance, because many car owners have not yet purchased replacement run-flat tyres.”

According to Bridgestone’s Lane, the price disparity is not only understandable but also disappearing: “It is important to understand that we are talking about a new and evolving technology. Yes, there is a cost differential between standard and run-flat tyres in the aftermarket, but this is being reduced all the time and the gap will continue to close as run-flat tyres become more popular.

“There are also cost savings to be had for drivers of cars fitted with run-flat tyres. They eliminate the need to carry a spare wheel, so the weight of the car is reduced by up to 20%, which in turn means the tyre has less contact pressure on the road, reducing fuel consumption and the wear of the tyre,” said Lane.

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Goodyear representatives gave a similar answer: “As we have seen in 4×4 and UHP tyres, there will always be low-cost brands targeting the replacement market. We do not believe new budget brands of run-flat tyres will significantly affect our market share. We trust in our products, and believe that drivers will heed our advice and renew their tyres with like-for-like replacements.”

The vast potential of the run-flat replacement market is clear, but with second-line manufacturers chasing behind the top five manufacturers, it looks likely the winning formula will be based on two things – OE strategy and price positioning.

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