According to Vilmos Tokaji, the sales director of Continental Tires responsible for the Region Southeast Europe, services will determine who will be the most successful in the tire industry of the future. We were talking about smart and all-season tires, the role of patterns and the unpredictability of the market.
What kind of year was 2022 for Continental?
2022 was successful for us both in Hungary and in the region, with particularly good business results, despite the market tended to stagnate. This year already brings us a lot of uncertainty thanks to a gloomier external environment.
We have also published the Q1 report of the European Tyre and Rubber Manufacturers Association (ETRMA), which indicates that sales volumes in the European tire market has declined. What is behind this in your opinion? Supply chains have been damaged, energy and raw material prices have soared and the consumers no longer accept the resulting higher product prices?
First of all, we have to note that manufacturers rather receive only second-hand information on the end-consumer purchases, since we primarily supply distributors and retailers. The volume sold by manufacturers has indeed decreased both in Europe and in Hungary. If we examine the reasons, then it is clear that due to skyrocketing energy costs and the price increase of certain raw materials, the tire prices have increased continuously over the last year and prior to the price increases, also in the fear of supply shortages, dealers have been taken significant volumes on stock. Now they started to reduce these stocks, as storage and financing costs have also been growing, and they do not expect further price increases, nor strong demand thanks to high inflation rates. All-in-all, I suppose that the main reason of the decrease of manufacturers’ sales volume is that the dealers had relatively high stocks, now they purchase less and are less motivated to build stocks. In the supply chain, we can now talk about consolidation compared to a year ago, the reliability of supply has significantly improved.
Cycles follow each other quite quickly. How can you make plans under these circumstances?
It is challenging. Therefore, there has been less focus on long-term planning in the last few years. Year 2019, i.e. the year before Covid, was the last ‘normal’ year when markets developed predictably and steadily. Since then there has been turbulence and unpredictability, but this applies not only to the tire sector. We cannot deny either that we have to work in a different environment, where priorities have shifted: the role of quick responses, agility and adaptability has become definitely more valuable.
What do you exactly mean by that?
As I have already mentioned, dealers are now less motivated to keep high stocks, and it is very important that manufacturers are able to respond to this and other similar rapid changes: we need to have a good supply chain, high and reliable logistics services to meet changing needs. One of the key factors is speed, which is why our new warehouse near Bratislava opened last year. Being capable to reliably deliver big amounts of tires is a significant advantage factor. Four million tires can go through it annually and a dozen of countries are supplied from there, including Hungary. On top of that, we are now able to supply the Hungarian market with a wider range of stock. Investments in such services will determine who can succeed in this industry in the future.
The term ‘smart tire’ regularly shows up in the news. What does it mean, what is the tire of the future capable of? How close are we to make it a true?
We are not close, but we are making progress. Continental is a pioneer in innovation, and Hungary has a prominent role in automotive development, with four R&D centres in the country. At these sites, my colleagues are not actually developing tires, but are working on broader automotive innovations. I do not predict any significant changes in the basic characteristics of tires as we know them today in the next few years. I think we are talking about evolution rather than revolution. sensors will soon also appear in passenger tires, which is a big step forward, but self-driving cars seem a little further away now than they did a few years ago. This does not mean shifting trends, rather that we need more time to change our transport, legal environment and technology.
There is one area that is growing relatively rapidly, at least in terms of market share: the all-season tire segment. What are these products capable of?
It is not easy to briefly answer this question, since tire use is not the same, just as drivers use their vehicles in different ways and places. We can no longer state that all-season tires represent a serious compromise for everyone. I would rather say that there is an area of use where these tires represent a minimal compromise and their convenience benefits outweigh them: less service visits – although they should still be checked at least once a year – and there is also no need to store tires that are not in use. I can agree with those who claim that this is not a necessary evil, as it is a good choice for many drivers, and not necessarily just for low-performance cars any more. I can confidently recommend nowadays’ products for certain uses, the market is growing, Continental’s premium product line will also be refreshed in the second half of the year.
What is the real significance of patterns? Apparently, manufacturers are keen to over-emphasise this, since they have been developing patterns for so long that it is hard to believe that there is still significant room for improvement in this field.
Serious R&D work is going on to ensure that we have the best possible product on the market, and indeed, we are constantly improving. Manufacturing technology is improving, compounds are improving and we are also changing the pattern to achieve the best possible results. The relevance of the latter goes beyond aesthetics: if you compare a manufacturer’s model of a few years old with a competitor’s new tire, the test results are clear: a 4–5-year-old pattern falls behind a new one.
Does it mean that if I change the six-year-old summer set on my car to this year’s pattern, I will feel the difference? Will I have better grip, stop easier, and control my car better?
Obviously, a new tire provides better performance than a worn one. However, even with a newer tread pattern, the car will certainly be more silent and the braking distance will be shorter. Although the latter is fortunately rarely tested by an ordinary driver, it might be a lifesaver when needed. Since a newly developed tire has a lower rolling resistance, this has a clear impact on fuel consumption. How great of a difference you feel in driving comfort and steering depends on your driving style and of course on the car itself.
Am I right if I say that since the full electric cars weight several hundred kilograms more than internal combustion engine cars, new types of tires will become necessary?
Tire development requires us to take into account the even growing market share of electric cars, as well as their characteristics. Weight is one of the important development factors, but in case of electric vehicles, the characteristics of the electric drive must also be taken into consideration, since there is a huge difference between the operation of an internal combustion engine and an electric motor. However, electric cars are also very diverse and it indeed makes a difference whether we are talking about a small city car or an SUV. When developing tires, we have to consider that they might also be fitted to electric vehicles, but this does not mean the need for a separate product line. As I mentioned at the beginning of this interview, the secret to success is to adapt to market conditions. Every Continental passenger tire line of the latest generations (summer, winter and all-season) is ready for e-mobility. To make this even clearer, the EV mark is already present on the sidewall of our latest tires.