Premium tires segment set to rebound strongly from Covid-19, latest Smithers data shows

Premium tires segment set to rebound strongly from Covid-19, latest Smithers data shows

LEATHERHEAD, Surrey, UK and AKRON, Ohio, USA – November, 03 2020 – Demand for prestige, luxury, and high-performance tires for cars and SUVs will fall to 281.1 million units worldwide in 2020, worth $35.1 billion. This is down from 289.4 million tires in 2019, as the coronavirus pandemic hits the global tire and automotive industries. 

Expert analysis in the new Smithers report – The Future of Premium and Prestige Tires to 2025 – anticipates a return to growth in 2021, followed by an acceleration of demand beginning in 2022. As the market stabilises, many of the same market drivers that have supported wider use of these superior driving tires through the 2010s will re-assert themselves.

Smithers forecasts that future global demand for premium tires will grow at a compound annual growth rate (CAGR) of 6.5% to reach 385 million tires in 2025. Value is set to grow at a faster CAGR of 7.7% across this period, and reach $50.8 billion in 2025.

Smithers’ analysis is based on a comprehensive market survey. This includes the outlook for passenger and light truck segments (compact/subcompact, mid-size, saloon/sedan/full-size/sports, SUV, crossover SUV, other light truck); and raw materials consumption (elastomers, extender oils and resins, carbon black, conventional and HDS precipitated silica, steel and textile cord, silanes and other chemicals) across all world regions, and 12 leading national markets.

The coronavirus will cause a sharp and broad global economic contraction in 2020, especially outside of Asia-Pacific. New vehicle sales have stalled, damaging premium OEM fitment demand, in particular. Simultaneously, working from home and reduced economic activity has led to fewer miles travelled, less wear, and hence a reduction in replacement tire purchases. As it looks to emerge from one of the most severe downturns on record, premium tire sales will face the same challenges as the broader industry, but is forecast to outperform commodity tire sales across 2020-2025. 

Premium tire sales will remain concentrated in higher GDP regions, mainly Western Europe and North America. Demand is diffusing into many developing markets too, especially China, which is recovering strongly from the Covid-19 disruption backed by official stimulus packages.

The global economic shutdown has revealed vulnerabilities in global tire supply chains. Many premium tire makers are investigating more localised production by shipping raw materials to a plants closer to the end user to facilitate customisation and offering product design that is more responsive to local demand. While evident before it struck, Covid-19 is prone to accelerate this trend in certain areas.

For end users, the 2020 drop in petroleum prices, social distancing rules and the lack of alternative recreational activities will support a renewed interest in leisure driving of high-performance vehicles. Furthermore, the existing trend for wider use of premium tires on sport utility vehicles (SUVs), and particularly crossover utility vehicles (CUVs), is forecast to resume.

As this evolves, there will be a need for premium tires that can operate with a new generation of top-range electric cars and light trucks. Equally, premium driving presents a key market opportunity for showcasing the new capabilities of smart tires to enhance control, responsiveness and safety in driving.

Also significant are mobility trends and preferences for premium tires in the OEM fitment segment. The demand for tires that optimise the driving experience on the latest sports and supercars will continue to push the envelope of performance. This will coincide with an emphasis on sustainability via improved endurance, durability, and use of renewable or recyclable materials – backed by stronger fuel-efficiency regulations. For the premium segment, handling and performance will remain the essential requirements, making sustainability considerations more muted than in standard passenger and commercial tires.

The impact of Covid-19, and the influence of other economic, demographic and technology trends on current and future demand for premium tires is examined critically in the new Smithers study – The Future of Premium and Prestige Tires to 2025. The historic, current and future market is quantified (by value and volume) and presented in a comprehensive data set with over 100 data tables and figures.  

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