facebooktwitterlinkedinyoutube

Are tyre manufacturers ready to ride on the next level of technology revolution within the automotive industry?

Are tyre manufacturers ready to ride on the next level of technology revolution within the automotive industry?

According to McKinsey & Company’s report, the global automotive industry will see an increase in profits to EUR 79 billion by 2020. Emerging markets are projected to grow more than three times as fast as established markets. The total contribution of emerging markets is said to amount to an approximately two-thirds of the total automotive profits.

The automotive profits over the last decade were derived from various contributing factors across different markets; they are namely an overall increase in domestic and export market demand, changes and restructuring in automotive policies as well as innovations through the use of technology. Of which, technology is seen as the most significant disruptor which will redefine the future of the automotive industry, opening new roadmap for technology-driven automotive and tyre businesses around the world.

Looking ahead: technology revolution within the automotive industry

PwC has summarised its auto industry growth strategies, highlighting five trends that will shake the automotive industry, which some of these include autonomous driving, rapid adoption of electric vehicles, and demand for broader connectivity between the consumer’s vehicle and surrounding ecosystem (Vehicle-to-Vehicle (V2V) and Vehicle-to-Infrastructure (V2I) technology). The analysis is also supported by General Electric which envisions that the “automotive industry” term would phase out as the “mobility industry” emerges, enabling transportation of people and goods using material and digital sciences through business models that entail sharing and shared ownership.

While there seems to be an overlying consensus amongst market leaders on the direction of technological transformation within the automotive industry, the varying conditions of each market, particularly the readiness to progress, make it difficult for auto companies to take on the entire global market share even with a single unified approach. For example, countries in Europe have been and are introducing new regulations and frameworks to make electric vehicles favourable over those that consume fuels. On the contrary, they are far from coming up with electric vehicles as compared to China. A recent article by a Forbes contributor highlighted that 2018 would be a transitional year for electromobility, which will set the world’s drive technology with its home location China in the future. On the other forefront, US giant, General Motors, and Tesla are advancing with the aim to launch driverless cars by 2019.

As a result, auto companies can no longer hope to provide solutions to every possible market given the complex nature of the industry as the competitive landscape intensifies.

What does this mean for the tyre businesses?

While the automotive industry, mainly involving the OEMs manufacturers, as a whole is making waves in the era of technological advancement, the global tyre landscape is also seeing a paradigm shift in the adoption of technology over the last three decades. What was created years ago are now entirely different from the tyres produce today; tyre makers and recyclers are continually innovating through different concepts of tyre construction to enhance the durability, performance, safety, recycling aspects of the tyre throughout its entire lifecycle.

One could say the by-products of innovation have led the global tyre industry to grow in profitability by providing economy-of-scale, increased productivity, and reduction of cost. For examples, a 17-inch tyre may seem beyond imagination in 1985 is now considered acceptable size, as expanded product lines, ranging from 20 – 22-inches tyres, tailored for SUVs ride are now a common sight on the road.

However, the situation is not all rosy. The competition to innovate and after that, survive is a harsh reality for many tyre companies. For companies that had fallen behind and were no longer able to compete with the innovators, exiting the business seems to be the only strategy. Many professionals from garages, workshops and tyre centres are increasingly finding it difficult to cope with the learning of new fitting techniques and product specifications for newer vehicle models, including Internet-enabled and electric vehicles. Besides, tyre businesses are faced with another hurdle of pricing their maintenance works for these more modern innovations as raising their price would risk losing their customers to rivals in a highly-competitive environment.

While tyre makers are advancing with newer innovations in the domain of material sciences such as improved rubber compounds and data-aggregating tools which are found in pneumatic tyres to measure the coefficient of friction, footprint, and pavement grade etc., there is the prospect of self-inflating tyres looming on the horizon. Tyre companies will need to look beyond innovating their product specialities and leverage opportunities that would potentially disrupt their businesses. They could explore opportunities with tyre recycling companies, OEM manufacturers, and players within the ecosystem to tap on shared research data for joint-technological development.

For the long run, tyre companies need to find their differentiating strategy to evolve their value proposition from “hardware provider” to “integrated mobility service provider.” Companies need to embrace the technology disruption with more readiness by accepting that their survival and profitability co-exist with the communities within tyre ecosystem they leverage on through partnerships. Finding a sweet spot to thrive within the newly-found mobility world is not only a race against competing businesses but also one against time as the revolution ride had already begun.

Rgt Smart StatsLATEST NEWSLETTER

Click to view ACTIONaBr now!