The tire industry is a tough one. Competition is fierce, profits are slim, and growth is hard to come by. But there’s a bright light on the horizon: electric vehicles. This booming market is accelerating the tire industry, creating a whole new demand for tires built specifically for these innovative cars. A recent CNBC YouTube video dived into this shift, exploring how EVs are changing the tire game. Here’s the full story.
The Current Status of the Industry
The tire industry, traditionally branded by slow growth and tight profit margins, faces numerous challenges, including fluctuating raw material prices and fierce competition. For many consumers, tires are viewed as commodities, with price being the primary factor influencing purchasing decisions. However, industry analysts suggest that the emergence of EVs could signal a transformative shift for tire manufacturers.
Tire Market’s Sluggish Pace
CNBC host, Robert Ferris talked about the tire market’s sluggish pace, where price is the main factor setting competitors apart. Despite some minor growth lately, the overall market size has been stuck around $50 billion for a while. With forecasts predicting a crawl of only 0.8% growth by 2027, he added that tire manufacturers are scrambling for new ways to expand and stand out.
A Challenging Landscape
Plus, most drivers don’t seem to care what brand they buy – they just look for the cheapest option. John Healy, an analyst at Northcoast Research, shared that about half of all drivers wouldn’t know a Michelin from a no-name brand!
Fierce Competition
Healy shared that this fierce competition based only on price makes it even harder for tire companies to stay ahead. Top it all off with the unpredictable way people replace their tires, and it’s a real headache for manufacturers to figure out how many tires to make and keep in stock.
The Electric Vehicle Revolution
The video shared that EVs, with their unique performance characteristics and requirements, require specialized tires engineered to meet the demands of these vehicles. As EVs become increasingly prevalent, tire manufacturers are adapting their products to accommodate the higher weight and acceleration capabilities of electric vehicles.
The History of Tires
This video also delved into the innovations that are changing the way tires work. On the surface, tires haven’t changed much since their invention. They remain primarily rubber tubes filled with air. However, beneath the surface lies a world of innovation. Ferris shared that companies like Michelin revolutionized the industry with the radial tire in 1946. Over time, tire compounds have been meticulously crafted, resulting in softer winter tires and adjustments for various driving conditions
Challenges and Opportunities
Ferris shared that EVs present both challenges and opportunities for tire manufacturers. One such challenge is noise reduction. EVs are considerably quieter than ICE cars, making tire noise more noticeable. Will Robbins from Bridgestone Americas said to imagine the sound of a bouncing basketball – the air inside the tire resonates similarly. This can be mitigated through noise-dampening foam inserts within the tire.
Battery Range
Another critical factor is maximizing an EV’s most precious resource: battery range. Ferris shared that while gasoline holds significantly more energy per pound than current lithium-ion batteries, EVs utilize stored energy far more efficiently. Unlike internal combustion engines that lose a significant portion of energy as heat, EVs deliver two-thirds of their stored energy to the wheels, even more with regenerative braking.
Tire Rolling Resistance
However, tire rolling resistance also plays a role in energy loss. Ferris shared that this resistance slows the tire down, similar to a rolling ball eventually stopping. Since EVs don’t have engine-related energy loss, minimizing rolling resistance becomes crucial for maximizing range. Studies have shown that the right tires can increase an EV’s range by as much as 15%.
Increased Tire Demand
Ferris also shared a surprising twist: EVs might actually lead to increased tire demand. Their significant weight compared to ICE vehicles puts more strain on tires. Plus, EVs accelerate much faster, causing tires to scrub the road harder as they grip for traction. He added that this rapid acceleration, coupled with the weight, leads to faster tire wear.
Another Layer of Stress
Regenerative braking adds another layer of stress, as the tire’s direction of rotation changes to slow the vehicle. High-performance tires wear out quickly under normal circumstances. The video shared that if you add the weight and power of an EV, these tires can wear down in as little as 15,000 to 20,000 miles, a concern considering their higher cost.
Opportunities for Growth
Ferris concluded that the EV revolution is a double-edged sword for tire companies. EVs need tires that cost 50% more and wear out 20% faster than the tires on your ICE vehicles. He shared that it’s a recipe for serious growth in the replacement market for EV-specific tires.
Getting Ready to Cash In
As Ferris pointed out, tire companies are getting ready to cash in on this surge in demand. But that’s not all. The rise of “smart tires” with built-in sensors and data analysis is changing the game entirely.
Preventative Maintenance
Ferris said to Imagine tires that tell you exactly when they need replacing, not just some vague guesstimate. He added that this opens up a whole new world of preventative maintenance and keeps drivers safer on the road.
The Growing Trend
On top of that, there’s a growing trend towards bigger rims, fueled by what drivers seem to want. Ferris shared that this presents both challenges and opportunities for tire manufacturers. They’ll need to innovate to meet these demands, but it’s a chance to stand out from the competition with truly unique products.
Share Your Thoughts
So what do you think? How can tire manufacturers balance the demand for specialized EV tires with the need to innovate and differentiate their products in a highly competitive landscape?
