Data from The Future of Winter Tyres to 2021 report shows world demand for these specialized products was 175 million units in 2015. This equated to a total value of US$19.3bn.
Across the next five years several factors will help this expand at a year-on-year rate of 4.4% – greater than the market average and yielding a total value of US$25bn in 2021.
Regional demand
Winter tires are an important subset that represents around one fifth of the total world tire market, but their use is highly localized to countries with harsher winters – northern, eastern and alpine Europe; North America; Russia; Japan; and China.
In 2015, Europe accounted for 60% of world demand – with Scandinavian and Central and Eastern European states the most significant. The relatively immature Chinese market will be the fastest growing over the next five years, during which it is predicted to more than double, according to the Smithers Rapra report.
Pioneering winter tire supplier Nokian reports that it sees potential for China to become almost as important as Europe in the longer term.
Regulations
Legislation, and in particular any mandatory requirement to fix winter tires for certain months of the year, is an important driver for the supply chain. Russia made winter tires obligatory under a new law that entered into force in January 2015.
Generally however, this is a fragmented regulatory landscape. In Canada, for example, winter tire obligations are set at a provincial level – with both Ontario and Québec enacting their own new laws in 2014.
South of the border, there are no similar winter tire mandates in the USA, even in states with the most severe winters. There is also little momentum in the direction of stricter requirements, despite lobbying in some quarters: in March 2016, the Colorado Senate Transportation Committee narrowly defeated a bill seeking to clarify tire traction requirements on Interstate 70 in the mountains.
In Europe, regulations are posted at a national level. This gives prominence to countries with a mandatory requirement – like Finland and Czech Republic – as all vehicles crossing their borders will need to have winter tires fitted. The prospect of a pan-EU regulation on seasonal tire use has been reduced by the UK referendum decision to leave the European Union trade bloc.
Technical challenges
Technology for the winter tire market is dynamic, both in terms of incremental improvements and potential breakthrough concepts. The challenge involves balancing conventional requirements, such as rolling resistance and handling, with winter-specific performance like ice or snow grip. Several new winter tire categories – like all-weather and high-performance winter tires – have now been developed, both of which are expected to gain market share over the coming years.
New compound and tread patterns are improving both winter/ice traction and wet grip, which can be selected depending on the local climate. Rolling resistance reduction is a primary focus for winter units as it is in many other tire segments.
Studded tires, long disfavored and sometimes banned due to the damage they can cause to road surfaces, are an area of strong interest and promising innovation. One disruptive option is the evolution of retractable studs, though some of these are still only in the concept phase; its impact is expected to be felt from 2019 onwards.
Outlook
Given the attractive margins and the important seasonal profits that winter products offer, most major manufacturers are keen to grow their presence in this market – though geographic location will play a key role in determining how effective competing strategies are.
Currently around one quarter of winter tire demand is from light trucks and three quarters from passenger cars. Because of this, and the inherent cost to the consumer of twice-yearly changes, overall economic conditions will affect future demand for winter tires significantly, except when they are mandated.
Demand for winter tires remains confined to colder climates, with Chinese consumption growing most strongly.
August 18, 2016
