Recently Morgan Stanley analysts, referring specifically to Michelin’s financial performance, wrote: “We believe it is simply unrealistic to expect current tyre prices to hold during an historic collapse of volume.” The recent fourth quarter round of prices increases will be the last “for possibly years to come,” they said. However, the truth is seldom as black and white as it appears and further investigation reveals that different segments are receiving different pricing treatment.

Almost immediately after Morgan Stanley made the above observations about Michelin’s pricing policy, Goodyear Dunlop UK announced that it is increasing the cost of its two premium tyre brands by 5.1% for Goodyear and 5.7% for Dunlop, effective Dec. 1. The price increase is set to increase all group brands. According to the company the move comes as a result of the recent “accelerated devaluation of the British pound versus both the euro and U.S. dollar.”

The British pound has fallen -17% and -27% against the euro and U.S. dollar, respectively, since Autumn 2007. Recently this devaluation has accelerated and since Oct. 1 sterling has lost 6% of its value compared with the euro and -17% against the U.S. dollar. The Goodyear Dunlop representatives Tyres & Accessories spoke to wouldn’t comment on the possibility of further increases, but simply said they are closely monitoring market conditions.

This means the various different suppliers are likely to approach the market in similarly varied ways. But what about an overview? Market analysts, Encircle Marketing, made 23,496 mystery sales calls to retail branches between January and November this year and collated 87,646 prices across 36 brands. In short what they found is the market’s pricing policies seem, rather like chancellor Alistair Darling’s recent pre-budget statement, to reduce prices at the bottom and particularly the middle of the market, while at the top end (especially in relation to run-flat tyres) prices are actually going up. However, even at the top end of the market there are clear signs that the rate of price inflation is slowing.

Compared with October’s average quotes, three of the four product segments demonstrated significant price deflation in November. Only the premium segment was able to increase prices, with the average tyre quoted at £125.14 in November (up £0.08 month on month). The largest month-on-month drop (-£3.01 per tyre) was recorded in the mid-range segment.

However, when you look at the figures on a year-to-date basis this situation is obviously more complex again. In the lower budget segment, tyres which started the year at an average of £59.89 have risen £9.09 to £68.98. This means lower budget products are now, probably because of the recent run of price increases at Chinese tyre manufacturers, being quoted at prices £4.99 per tyre higher than their upper budget cousins.

At the same time, upper budget tyre quotes fell a whopping £5.89 a tyre to £63.99 in the year till November. Mid-range brands are reported to have experienced a similar drop in price during the course of 2008, falling from £91.15 in January to £85.91 in November, having peaked at £93.47 in February.

In the premium segment the average tyre quote rose £9.63 during the course of 2008 – the most of any segment surveyed. Considering that prices started at £115.53 in January, quotes of £125.14 in November represent a significant increase.

As far recommendations per segment are concerned, this remained pretty much static this year with roughly 23% of quotes suggesting lower budget products, 9% upper budget, 28% mid range and 40% premium tyres. With this in mind it interesting to note that there were some significant differences in the total market share of brand recommendations (comparing the first of 2008 with the second).

The Bridgestone, Kumho, Dunlop and GT brands made the best gains with 0.96, 0.79, 0.51 and 0.38-point gains respectively. Nexen, Pirelli, Sava, Falken and Fulda were not far behind. However, at the other end of the spectrum Arrowspeed, Firestone, Avon and Michelin lost 1.01, 0.73, 0.68 and 0.64 points of recommendation share in the second half of the year. (Tyres & Accessories/Staffordshire, U.K.)