Why Tire Companies Love EVs
CNBC
14 min, 5 sec
A detailed analysis of the tire industry's current state, challenges, and opportunities arising from the advent of electric vehicles (EVs).
Summary
- The tire industry is characterized by slow change, low growth, and susceptibility to raw material costs with buyers often indifferent to brands.
- Electric vehicles (EVs) present new opportunities for tire manufacturers, with EV tires costing more and needing more frequent replacement.
- Innovations in tire technology, such as new compounds and designs, have improved tire performance and lifespan.
- The shift to EVs is expected to increase tire demand, with EV tires being more expensive and wearing out faster due to heavier vehicle weight and quicker acceleration.
- Tire manufacturers face the challenge of balancing R&D investment in traditional and EV tire markets, as well as adapting to new trends like tire intelligence.
Chapter 1
The tire industry maintains a steady market value with slow growth and is highly competitive, with low margins and sensitivity to raw material costs.
- The tire market is valued at around $50 billion and grows slightly faster than the population but slower than GDP.
- Buyers often perceive tires as commodities, focusing on price over brand differentiation.
- The industry has low growth prospects, with an expected increase in overall demand of about 0.8% through 2027.
Chapter 2
Tire companies face challenges from fluctuating raw material costs, customer indifference, and the unpredictability of replacement demand.
- Key materials for tire manufacturing include rubber, fabric, steel, and carbon black.
- Around half of customers are indifferent to tire brands, making price a major factor in purchasing decisions.
- Unpredictable factors like driving habits and climate affect the regularity of tire replacements.
Chapter 3
Tire manufacturers seek differentiation through innovation, but face the paradox of improving product longevity, which reduces replacement frequency.
- Companies compete by creating tires that last longer, reducing replacement frequency.
- Investment in R&D for improved tire durability ultimately slows business growth due to extended tire lifespan.
Chapter 4
The rise of electric vehicles introduces new challenges and opportunities for tire manufacturers, such as increased tire wear and demand for innovation.
- EV tires are more expensive and wear out more quickly due to the vehicles' heavier weight and faster acceleration.
- Technological advancements in tires, such as radial designs and compound improvements, have evolved to meet varying performance needs.
Chapter 5
Tire companies are poised for growth with the expansion of the EV market and the need for specialized tires.
- The EV tire replacement market is expected to grow significantly, with increased costs for consumers due to more frequent replacements.
- Tire makers like Bridgestone and Goodyear offer extended warranties on their EV tires, indicating improvements in tire longevity.
Chapter 6
The tire industry continues to evolve with innovations like tire intelligence and increased rim diameters, demanding more investment in R&D.
- Tire intelligence involves sensors that monitor various aspects of tire health, aiding in maintenance predictions.
- The trend towards larger rim diameters to match vehicle size increases complexity and costs for tire manufacturers.
More CNBC summaries
How Safe Is Tap Water In The U.S.?
CNBC
The video discusses the safety concerns, infrastructure challenges, and the rising importance of water filtration in the United States.
Why Do Groceries Cost So Much? | CNBC Marathon
CNBC
This video provides a detailed examination of food fraud, its impact on consumer health and the economy, as well as the organic food industry, including its history, regulations, and consumer perceptions.
How Budget Airlines Like Ryanair Make Money
CNBC
The video discusses the business practices of budget airlines, their growth, challenges, and the experience of flying with them.
Why Passenger Train Manufacturing Is Booming In The U.S
CNBC
The video details the current state and future plans for passenger rail travel in the U.S., highlighting investments, challenges, and manufacturer perspectives.
Why Central Banks Want To Get Into Digital Currencies
CNBC
The video focuses on the booming interest in cryptocurrencies like Bitcoin, the advent of central bank digital currencies (CBDCs), and their implications.