Is the Light Truck/SUV Market Too Specialized
The light truck and SUV category is many things to many different people. First and foremost, it’s a booming market. The popularity of the LT/SUV tires has been amazing, and shows no sign of letting up anytime soon. All over, dealers are capitalizing on the profitability of carrying LT/SUV tire lines.
Secondly, operating within this market requires a lot of education. Dealers have to be fully aware of the types of vehicles that customers have, the intended use of a particular vehicle and all the different tires that can fit all the different applications.
And third, these tires can be very confusing for a dealer. There’s a lot to know when it comes to the light truck/SUV market. Lots of lines, lots of sizes and tons of different categories.
In fact, the fragmentation of the LT/SUV market has got to be one of the biggest concerns for the average dealer. Not because there might be too many tires flooding the market; that doesn’t seem to be able to happen. What can cause a problem is that there are simply too many factions within the market.
Over the years, the light truck and SUV market has splintered like a broken piece of glass. Coupled with the many categories that exist, are a seemingly infinite number of sub-categories, designed to meet practically each and every individual need of anyone who has ever bought one of these vehicles. It’s gotten to the point where a dealer almost needs to keep a chart handy to figure it all out.
And therein lies the dilemma. Despite the category’s complexities, a dealer needs to have a working understanding of all the different tires, in all the different niches, in order to meet all the different needs of the customer. While the evolution of the LT/SUV market has done wonders for profits, it has done nothing to aid a confused dealer.
“To get a good view of where the light truck/SUV market will evolve to, just look at the passenger car market. Today the passenger market has several segments,” said Rick Brennan, Yokohama’s product planning manager. “Over the last several years, light trucks have taken the place of many of these cars in the family garage. The people buying them, however, still have the same wants and desires for the vehicle, they just want more.
“The sport utility and light truck vehicles are heading the same direction as cars. New models are evolving that target the needs and wants of specific groups of consumers.”
“Today, (different segments of light truck/SUV tires) are still forming, so the lines differentiating the consumer and the vehicle are not clear,” Brennan continued. “This gray area is creating a large amount of specialization among car and tire makers to try to fit what the consumer wants. This means many different types of the same thing are in the market.”
When it comes to subdividing the LT/SUV market, many tire makers create categories based on how the tire is to be used. Some customers need a tire that can handle harsh off-road conditions, such as mud, rock and snow. Others will refuse to drive on anything but normal, paved roads. And let’s not forget all of those in between. Multiple tastes translate into multiple applications.
“We base our tires for the light truck/SUV market on the application of the tire. However, we do see some smaller niche areas that require special tires,” said Ron Wells, marketing manager for Goodyear light truck tires. “We continue to see the blending for trucks and cars and must address each application as they emerge. One niche is the off-road tire for the enthusiast, which has resulted in our current introduction of the Wrangler MT/R (Max Traction Reinforced).
“We also recognize that many consumers fail to rotate their tires, which resulted in our introduction of the Wrangler RF-A (Rotation-Free Aquatred) in 1998. Another recent niche that is growing is the luxury SUV and special tire needs that the market requires.”
In the LT/SUV field, there is no getting around the fact that there are going to be a lot of subsections. What can really be confusing are the different names given by different tire makers for the same categories. Practically every company that manufactures tires makes a LT/SUV tire and those companies are entitled to create their own divisions.
“We recognize categories like highway luxury or touring, highway or all-season, on- and off-road or all-terrain and performance or S- through Z-rated tires,” said Phil Pasci, Bridgestone/Firestone’s (BFS) product marketing manager. “Most of those are P-metric sizing however. Light truck sizing is used for heavier vehicles and loads.
“We have the same categories as before in the light truck segment, although highway luxury is a relatively small segment and the performance tires are S- through V-rated.”
What would probably make most dealers happy is some kind of universality. Something that would make life easier for dealers who carry multiple lines from multiple manufacturers.
“Michelin’s view of the light truck/SUV market is consistent with that of J.D. Power & Associates, who have done an effective job in identifying product categories in order to segment the light truck/SUV market,” said Don DeMott, the marketing manager for Michelin brand. “J.D. Power has expanded its view from three categories to six, which now includes premium mini, traditional mini, compact, intermediate, luxury and full-size.”
Being able to wrap your arms around every single size, line and SKU involved in the LT/SUV market is something most dealers will never be able to do. However, with a little education, primarily from the manufacturer, dealers will be able to develop a working knowledge of the market and be able to better serve the variety of customers that are bound to enter their shop.
Rush to Specialization
Not only is the light truck and SUV market fragmented, but the fragmentation happened almost overnight. In a move that originated not with tire manufacturers, but by the vehicle makers themselves, the LT/SUV market fractured into many pieces in order to give consumers a better choice, thus generating more revenue.
“There are several reasons why the market fragmented so quickly,” said Pasci. “First, this segment evolved from the station wagon and then to the minivan. To many, the minivan did not offer the kind of image or appearance that many consumers wanted. The SUV fit that need, plus it had additional towing and hauling capacities.
“Secondly, the OEMs applied the same strategy as they had with the passenger car segment, increase the number of packages to increase margins. And third, people found out that most SUVs still rode like a truck, so the OEMs began to offer increasingly more luxurious versions to address the need for better ride, lower noise and improved creature comforts.”
But the vehicle OEMs can’t bear all the blame for an ultra-segmented market. They’ve only produced so many different types of vehicles. It’s the tire makers that have taken market segmentation to new heights.
“We’ve seen such rapid growth because manufacturers recognize the light truck/SUV market as a huge opportunity to differentiate itself from the rest of the pack,” said DeMott. “By developing their own little niches within the marketplace, manufacturers can easily distinguish themselves from each other.
“Also, demand has been so strong across consumer segments that automakers needed to come out with a variety of vehicles to meet consumer desires.”
And feeding the needs of the customer is what it all comes down to. No matter how many different types of LT/SUV tires that a dealer has to wade through, keeping the customer satisfied keeps profits coming through the door.
“Specialization occurred quickly because of explosive demand and growth in this market,” said Goodyear’s Wells. “With the number of manufacturers involved, product differentiation was required to keep pace with consumer demand.”
Are The Cracks Getting Bigger?
All right, so a dealer has finally figured out all the different segments of the light truck and SUV market. The question now becomes, will the market continue to segment? Are all the different types of LT/SUV tires just the tip of the iceberg compared to what could happen down the road?
Many in the industry say yes.
“Most likely, the market will continue to splinter rapidly,” said DeMott. “The light truck/SUV business has been extremely profitable for manufacturers and with the introduction of various SUV sizes and styles, and now hybrid vehicles, there is an obvious opportunity for manufacturers to continue developing niches to set themselves apart from competitors.
“In addition, the automakers’ ability to create new vehicles based on existing platforms allows them the opportunity to develop new models at a much lower cost.”
Naturally, much of the splintering that has developed in the industry is a result of the wants of customers. Customers want a tire to perform a certain way, look a certain way and possess a certain feel. With that in mind, there seems to be an infinite number of ways to divide up the LT/SUV market to suit the needs of the customers.
“We may continue to see some additional splintering,” said Wells. “As growth continues, we see vehicle manufacturers introducing multiple platforms for the same vehicle with differing image requirements and tire needs.”
When it comes to the LT/SUV category, a lot is determined by how the tires are being used. Or, in many cases, how they aren’t being used. Many consumers simply like the “look” of a particular vehicle, never having the intention of operating it under the conditions the vehicle was designed for.
“Although the great majority of these vehicles never see off-road use or carry a load, the look of a light truck is important,” said Brennan. “As tire makers try to differentiate their products, the number of different designs and styles that do basically the same function will increase. Sounds like the passenger tire market, doesn’t it?
“The overwhelming number of all-season and H/T designs in the market today are due to the use of the vehicles. They are used primarily for on-road use and have taken the place of the station wagon, sedan or minivan. The desire for a look to match the vehicle has driven the proliferation of tire styles and types.”
However, not everyone within the industry thinks segmentation will continue. Some see the number of different areas evening out, with features like ride quality, handling and noise becoming focal points of the market.
“We don’t expect to see further segmentation,” Pasci said. “What we do see is a trend toward luxury highway tires for a better ride and reduced noise, with the market moving away from on- and off-highway designs.”
Where Is The Future?
The future of the LT/SUV market is sound. Obviously, these vehicles are still gaining in popularity and are showing no real signs of slowing down anytime soon. But, unfortunately for already confused dealers, the marketplace will continue to fragment. Much like the passenger car market has already done, the LT/SUV market is still feeling itself out.
How many categories will develop? Will some of these little sub-categories consolidate? These questions can’t truly be answered immediately. Only time will tell if the LT/SUV market will become more or less dense. Time Ñ and the vehicle manufacturers.
“The lines will continue to blur with the way manufacturers look at the light truck/SUV market,” DeMott said. “The trend toward developing hybrid vehicles will likely continue, and we’ll see more and more differentiation among automakers.
“In fact, looking at new vehicles like Chrysler’s PT Cruiser, the terms “SUV” and “light truck” might not be sufficient in the near future to describe what exactly a vehicle is, or its function.”
When it comes to the future, Michelin’s DeMott echoed what Yokohama’s Brennan said earlier: the LT/SUV market will continue to broaden just as the passenger car area did.
“What’s happening with tires related to the light truck/SUV market in many ways mimics what happened with passenger car tires,” said DeMott. “As the varying types of passenger cars evolved, tire solutions were developed to meet the needs of each segment.
“For a long time in the light truck segment, manufacturers provided one tire line to meet all needs of all vehicles in the category. Now, there is enough differentiation within this vehicle category to demand variety, or specialization, with tires.”
Added Brennan: “Where will the market go? Just take a look at the next round of light truck styles. There are four-door mid-size trucks, the sport models are growing, luxury models are increasing and the SUVs are exploding.
“As tire makers chase the cosmetic appeal needed to gain an advantage, a greater number of tire types and designs will hit the market.”
It seems that most of those involved in the industry feel that the LT/SUV market will continue to splinter over time. Specialization will not only persist, but play an important role in customer satisfaction.
“There will be more designs toward more highway all-season performance and away from all-terrain. The rides will become quieter and smoother,” said Pasci. “The tires will also have a larger diameter and cross section with lower aspect ratios.
“The tires will also see decreased rolling resistance, which will be an OEM requirement. And these tires will begin moving away from outlined white letters to a blackwall for a more sophisticated appearance.”
But not only will the different types of tires increase, but also the number of tire sizes.
“The growth in the light truck/SUV market is forecast to be very strong, particularly in the P-metric segment of the business,” said Wells. “We’ll also see an increase in tire size. Tires have moved from 15 inches up to 16 inches in the last two years. We are now seeing more moves toward the 17-inch tires in this segment.”