NAICS: 32-6211 Tire Manufacturing (except Retreading), 32-6212 Tire Retreading
SIC: 3011 Tire and Inner Tube Manufacturing
NAICS-Based Product Codes: 32-62111 through 32-6211H239
A tire is a tube composed of rubber, fabric and steel that fits around the rim of a vehicle's wheel to aid in its motion. The rubber is reinforced with cords of nylon, fiberglass, rayon or strands of steel. These cords strengthen the tire and also improve the tire's handling. This network of cords is known as a carcass. The tire is most associated with the automobile, but is a vital part of many types of vehicles and equipment, including airplanes, motorcycles, scooters, strollers, golf carts, and lawn mowers.
Tire Parts and Construction
There are four types of tires: bias, belted bias, radial ties, and solid tires. Early pneumatic tires were comprised of an inner tube inside a casing reinforced with plies (rubberized fabric cords embedded in the rubber). In bias tires the plies run diagonally from the bead on one inner rim to the bead on the other with each ply crisscrossing the others. Belted bias tires add a fiberglass strip to the bias-ply tire. Bias-ply tires were the standard of the industry until the introduction of radial tires, which offered greater longevity, better performance, and improved fuel economy. In radial tires the body ply cords extend from the beads and across the tread so that the cords are laid at approximate right angles to the centerline of the tread, and parallel to each other. The advantages of this construction include longer tread life, better steering control, and lower rolling resistance. Solid tires are used on golf carts, lawn mowers, and other types of lawn and service equipment.
The principal tire components are the tread, nylon and steel belts, plies, sidewall, the pneumatic liner, and bead. The tread is the part of the tire that comes in contact with the road. It consists of a thick rubber compound that is designed to wear slowly. The tread plays an important role in fuel efficiency and safe handling in poor weather. Nylon belts improve rigidity in the sidewall, while steel belts reinforce the tread, and plies provide structural support to the air cavity. The plies are fabric in passenger and light truck tires and steel in heavy truck tires. Textile fiber in the plies can be nylon, polyester, or rayon, depending on the type of tire desired. The sidewall is the bridge between the tread and bead. The sidewall is reinforced with rubber and fabric plies that provide durability and flexibility.
An alpha-numeric code is molded on the sidewall of virtually all tires as they are produced. This code is based on standards that allow a person who knows the standard to quickly assess basic performance characteristics of the tire. For example, one such code is 205/55R1688 V XGT V which can be broken down as follows:
- 205 = width of the tire in millimeters
- 55 = aspect ratio or sidewall height (percentage of tire width)
- R = radial construction
- 16 = the diameter in inches
- 88 = numerical code associate with the tire's maximum load
- V = tire speed rating for which an alphabetical rating is given
- XGT V = the final four letters are reserved for the use of the manufacturer in identifying it's own design particulars for the tire
Early Tire History
Natural rubber has been around for centuries. The commercial possibilities of the substance were recognized as early as the eighteenth century. Charles Goodyear developed the process for vulcanizing rubber in 1838. His process, in short, cured the rubber so that it could be preserved and more easily shaped. The first rubber tires appeared in the 1800s. These were solid rubber tires, however. Robert William Thomson developed the first pneumatic tire in 1845. Pneumatic tires have compressed air in their tire casing, which design helps the tire absorb and distribute any possible shocks. Thomson's tire consisted of a hollow belt of India-rubber inflated with air so that the wheels presented a cushion of air to the ground. This elastic belt of rubberized canvas was enclosed within a strong outer casing of leather, which was then bolted to the wheel. Thomson's invention worked, but was not commercially viable. He lacked a source for the strong thin rubber necessary for the inner tubes, so he turned to the development of solid rubber tires instead.
Pneumatic tires fell out of favor with other inventors and manufacturers as well for some period of time. The bicycle is given credit by historians for renewing interest in pneumatic tires. The bicycle became popular in the United States in the nineteenth century. Pneumatic tires had been added to the vehicle, making in lighter, faster, and more capable of absorbing shocks.
In 1888 John Boyd Dunlop, a Scottish veterinary surgeon living in Belfast, Ireland, developed a pneumatic tire for his son's tricycle after watching the child struggle to ride the tricycle with its solid rubber wheels over cobbled ground. Dunlop wrapped the wheels in thin rubber sheets, glued them together, and then inflated them with a football pump. The following year he founded the Dunlop Rubber Company (now part of Goodyear) and opened his first tire plant in Dublin, Ireland.
Èduoard and André Michelin incorporated their rubber factory in 1888. They made a number of contributions to the development of the tire industry. In 1891 they took out the patent for the first removable pneumatic bicycle tire. Four years later the company introduced the first pneumatic tires to automobiles. In 1946 the company introduced the first radial tire. Other companies also made contributions. Goodyear patented the first tubeless tire in 1903 and BFGoodrich the first synthetic rubber tire in 1940. Numerous other changes in tire manufacturing took place in the first half of the twentieth century, including the development of new valve stems, the creation of mountable rims, and the invention of grooved tires to improve road traction. Pneumatic tires moved into new markets; airplane tires became pneumatic in 1906.
The Radial Tire and the 1970s
Michelin was the first company to produce a marketable radial tire design. The company patented its steel-belted radial tires in Europe in 1946 and introduced its "X" tire at the Salon de l'Automobile in Paris in October 1949. In radial tires, the ply cords radiate at a 90-degree angle from the wheel rim, rather than diagonally, and the casing is strengthened by a belt of steel fabric that runs around the circumference of the tire. The advantages of radial tires include much longer tread life, better steering, and less rolling resistance, which increases gas mileage.
The radial tire enjoyed popularity outside of the United States by the 1970s. In France, for example, 97 percent of tires produced were of radial construction; in Italy, radials claimed 80 percent of the market. The tire market in the United States, however, consisted of bias-ply tires. In the United States, radials represented just 2 percent of the market.
There are several reasons American manufacturers resisted the radial tire. It was manufactured differently than the bias-ply tires. This required substantial investment by tire makers in new equipment and production methods. Possible new equipment included new tire building machines, fabric and wire-bias cutters, and special stacking and handling equipment. Vehicle suspension systems would also need to be redesigned and there were other cost issues. Radial tires produced more scrap and defective tire than their standard tire counterparts. Radial tire construction simply had higher labor costs than bias-ply tires.
The adoption of radial technology was helped along in several ways. Beginning in the 1960s consumers became increasingly concerned with the power of big businesses and the safety of the products and services they provided. Ralph Nader, a consumer activist, called attention to the lack of safety in numerous industries, including food production, air travel, and toys. One of his major targets was the automobile. In 1965 Nader published Unsafe at Any Speed, detailing the rollover tendencies of General Motors' Corvair sportscar. General Motors was later found to have hired private detectives to discredit Nader. James Roache, then company president, was brought before Congress to testify about the company's actions. He publicly apologized to Nader.
The response to the scandal prompted two pieces of major legislation: the National Traffic and Motor Vehicle Safety Act of 1966 and the Highway Safety Act of 1966. In 1970 the National Highway Bureau was renamed the National Highway Traffic Safety Administration. The government would now track deaths, accidents, and economic losses on the nation's highways.
In 1975 Congress passed the Energy Policy and Conservation Act. This act required automakers to meet fuel efficiency standards known as Corporate Average Fuel Economy (CAFE) standards. It should be noted that the 1970s was a decade marked by inflation and high gas prices or shortages. In short, a consumer wanted a vehicle that was safe and offered good gas mileage. The radial tire, which offered good traction and had a life span of 100,000 miles (compared to 30,000 for a bias-ply tire), was a step in the right direction. (There was a major loophole in the legislation: there were different standards for automobiles and light trucks, which were just starting to cross into the consumer market.)
The 1980s and 1990s
Radial tires were the industry standard by the end of the 1970s. For example, in 1973, 11 percent of GM cars and 26 percent of Ford cars were being equipped with radials. Two years later, it was 86 percent and 90 percent, respectively. By the 1980s more innovation came to the industry with the introduction of high performance tires, all season tires, and high performance all season tires. All season tires were something of a compromise in the industry, offering features of both standard and winter tires. With the push for manufacturers to meet CAFE standards and improve fuel efficiency, some features of the all weather tire were abandoned. This is why all weather tires perform slightly poorer in snow and rain than in good weather. An additional advantage of the all weather tire was that car owners now only needed one set of tires; no switch to winter tires was needed when bad weather arrived. It should be noted that the winter tire market has never quite recovered from this industry shift. At their high point in 1972 winter tires represented 19 percent of the replacement market. By 1992 they would represent only 4 percent of the market, according to Modern Tire Dealer.
Also during the 1980s, a wave of mergers took place in many industries, including the tire market. The Bridge-stone Corporation of Japan acquired the Firestone Tire and Rubber Company in 1988. The Michelin Group of France agreed to acquire the Uniroyal Goodrich Tire Company in 1988. These two mergers transformed the industry. The Bridgestone Firestone merger created the third largest tire maker in the world. Uniroyal had a strong presence in the private-label tire market and was a major player in the overall retail chain tire market. Michelin's acquisition of the company provided it access to a market it had long wished to enter. Michelin would go on to acquire Goodrich. Continental would acquire General Tire. This led to more shifts in the industry. Goodyear had 24 percent of the global tire market share in 1971, according to analysis by Peter J. West and the Financial Times. It was the only U.S. firm to maintain its independence during this period. By 1993 its share had fallen to 17 percent. Michelin's share jumped to 19 percent from 11 percent over the same period. Bridgestone's 3 percent grew to 18 percent. Continental jumped from 2 percent to 7 percent; in 1993, it was the fourth largest player in the world market.
The Auto Industry Goes Global
More shifts took place in the industry in the 1980s. The auto industry began to globalize, aided by inexpensive technology costs. Automobiles from Japan and other nations began to arrive in the U.S. market. The government was slow to enact trade policies that might bring balance to the import and export agreements between the United States and its trading partners. Consumers quickly took to these imports for their quality and attractive designs. According to Ward's Communications, imports represented 20.9 percent of new passenger car sales in 1980. By 1985 the share increased to 25.7 percent.
With the car market becoming global, it makes sense that the tire industry had to become global as well. This was difficult for American firms, because many had already sold off a number of their foreign holdings. It may have been easier for these companies to be acquired by foreign owners then invest in new plant construction. Foreign companies began to build operations in the United States. It is good business practice to have operations close to the market in which one sells. For auto production, it also makes sense to have tire operations close to vehicle operations. By 1993 an estimated eleven foreign-owned car plants operated in the United States. By 2007 there were twenty-eight such plants.
Tire makers faced other challenges in the 1990s, most notably too much capacity in the weak auto market. Companies engaged in price-cutting wars. Tires are rather tricky to market; the only way to really distinguish a tire to a consumer is through a low price and brand name recognition. These price cuts came even as production costs continued to rise. This meant that tire makers had to trim their own costs if they hoped to make money.
In the United States, 158 companies employing 63,842 production workers were involved in the production of tires in 2002, according to the most recent figures available from the U.S. Census Bureau's report titled Tire Manufacturing (Except Retreading): 2002. Tire shipments in that year had a total value of $13.4 billion, a decline of more than $1.3 billion during the preceding five years, a reflection of increased pressure from Asian imports. The decline in the industry can be seen by the fall in the number of U.S. companies (down from 161 in 1997) and the fall in the employment level (down from 74,342 workers in 1997).
U.S. companies involved in tire production in 2002 included twenty-two devoted to passenger car tire casings. Sixteen companies produced truck and bus tires, including both highway and off-road tires. Four companies produced tires for farm and industrial tractors and various wheeled implements. Four companies were dedicated to other types of industrial and utility tires, including garden tractors. Also three produced tires and casing for other types of applications, including motor bikes, motorcycles, moped bicycles, aircraft and mobile homes. Among the other companies engaged in tire production at various levels, eleven produced solid or semi-pneumatic tires, three were dedicated to inner tube production, and twenty-five supplied tread rubber, tire sundries, and repair materials.
While shipments of new tires by U.S. manufacturers declined over the period from 1997 to 2002, shipments by companies doing tire retreading increased over this period. There were 597 companies engaged in the tire retreading industry in 2002, a decline of 153 companies since 1997 as larger companies squeezed out smaller ones with improved processes and lower costs. Those companies employed 8,083 production workers in 2002, an increase of 228 employees, and shipped nearly $1.3 billion worth of product, up more than $3 million.
The Census Bureau's reports on the tire industry for years since 2002 combine the figures for manufacturers and retreaders. The total value of shipments for these two tire categories in 2002 was nearly $16.4 billion, up some $1.7 billion from the $14.7 billion in 2002 as domestic production regained ground.
The Tire Industry in 2005 and 2006
The global new tire market in 2005 was worth $101 billion with an annual growth rate of 6.5 percent. Annual tire sales tripled from 1985 to 2005, according to the 2007 edition of the Michelin Factbook. Pneumatic tires—primarily radial designs—are now used on virtually every type of land-based transportation vehicle around the globe, plus aircraft, amphibious vehicles (primarily military), and even the space shuttle.
Cars and light trucks accounted for 88 percent of all tires sold worldwide in 2006. A total of 1.1 billion tires were sold for use on passenger cars and light trucks in 2006 and 166 million tires were sold that year for use on heavy trucks. Three out of four tires purchased for cars and light trucks are replacement tires. The percentage of replacement tire purchases grows to 85 percent for commercial trucks, reflecting the millions of miles many intercontinental trucks drive each year. Retread tires also account for a significant share of the truck tire market—approximately 17.6 million retread tires were sold in the United States and Canada in 2005, for example, representing sales of more than $3 billion, according to the Tire Retread Information Bureau.
The tire industry is concentrated in the hands of three major global players—Bridgestone, Michelin, and Goodyear—accounting for more than half of all the world tire sales. According to Market Share Reporter 2007, Bridges-tone was the largest tire maker in the world with an 18.2 market share. Goodyear had a 17.3 percent market share. Michelin followed with a 17.2 percent share. In the North American market Goodyear and Dunlop represented 27 percent of sales, Michelin, Uniroyal, and BFGoodrich represented 22.1 percent of sales. Bridgestone/Firestone had 18 percent of sales.
|Company and Country Headquarters||Market Share (Percent)|
|Goodyear (United States)||17.3|
|Hankook (South Korea)||2.5|
|Cooper (United States)||2.1|
|Kumho (South Korea)||1.9|
Goodyear is the leading tire distributor in the truck tire market. Goodyear was the leading provider of tires to light trucks in the United States in 2006. It was also the leading provider of tires for medium and heavy trucks. Bandag, Michelin and Goodyear command over 90 percent of the tire retreading market.
Geographically, Europe and North America are estimated to account for slightly over half of world sales; China, 11.3 percent; Japan, 8.3 percent; other Asian countries, 13.2 percent; Africa and the Middle East, 7.9 percent; and South America, 6.4 percent.
A summary of the leading players in the tire manufacturing industry worldwide is presented in Figure 206. The dominant companies on that list are briefly profiled here.
Established in 1931 Bridgestone is headquartered in Japan. The company was number one in sales globally in 2005, surpassing Michelin, which had held the number one sales position for the previous four years. With 80 percent of its net sales attributed to tires, Bridge-stone produced a full range of tires for passenger cars and trucks, earthmoving equipment, agricultural equipment, aircraft, buses, motorcycles, racecars, scooters, and even subway trains. Bridgestone purchased U.S.-based Firestone in 1988 and continues to use the Firestone name in brands and some of its retail establishments. Like many major tire makers, Bridgestone has sought to purchase any part of the tire manufacturing supply chain in Asia. The company owns factories there and purchased a rubber plantation in Indonesia in 2005.
Founded in the late 1800s, this company is based in France and makes tires for every type of transportation that has wheels. Michelin's major brands for passenger tires are BFGoodrich and Uniroyal in the United States, Kleber in Europe, and Warrior in China. Michelin produces 190 million tires per year and owns rubber plantations and factories around the world.
The Goodyear Tire and Rubber Company is the third largest tire manufacturer in the world, with $19.7 billion in sales. Founded in 1898 and headquartered in Akron, Ohio, Goodyear has factories and other operations on several continents. More diversified in product manufacturing than Michelin or Bridgestone, Goodyear also manufactures power transmission belts, hoses, and other rubber products in the transportation industry. It also operates commercial truck services, and tire retreading centers, as well as tire and auto service repair centers in the retail sector. Goodyear operated 90 plants in 28 countries, and 1,700 retail tire and auto centers. Goodyear brands include Goodyear and Dunlop.
MATERIALS & SUPPLY CHAIN LOGISTICS
Tire manufacturing is a complex and very precise process, requiring expensive raw materials, notably natural and synthetic rubber, fillers, chemicals, textiles and steel cords with steel and oil derivatives accounting for approximately 60 percent of the raw material cost. According to the Michelin Factbook, the raw material needs break down as follows.
The global demand for natural rubber annually measures 20 million tons with tire makers regularly consuming 75 percent of the world's natural rubber. Southeast Asia, China, and India account for over 90 percent of the world's natural rubber production with Thailand, the largest natural rubber exporter, shipping some three million tons annually. Carbon black, a soot-like powder formed as a by-product of petroleum processing, is another important raw material in tires. Added during the curing process, carbon black gives tires their black color and acts as reinforcement to the rubber. Other materials include zinc oxide, which assists in the curing process, and sulfur and UV ray inhibitors, which keep the sun's ultraviolet rays from cracking the sidewalls. Textile fabrics used in tire production to form the plies, are cotton, rayon, or polyester.
The word rubber actually describes a product with certain properties rather than a specific material. So-called natural rubber is formed from processing the milky liquid sap, called latex, of several varieties of plants. The Para rubber tree, the major source of the sap, is native to the Amazon jungle and has been intentionally propagated on plantations in other tropical climates around the globe exclusively to supply rubber for the tire industry. To harvest the rubber, a sharp spigot is driven into the trunk of a rubber tree and the sap is collected in a small pan, similar to maple syrup production in North America.
Natural rubber was the primary ingredient used in tire production from the late nineteenth century to the 1940s when it was gradually replaced with synthetic rubber, a development hastened by World War II when the war made rubber plantations largely inaccessible in the Pacific. As a result, the United States and German governments devoted significant resources to develop synthetic rubber to meet wartime demands for the material, virtually running the industry in their respective countries for the duration of the war.
While natural rubber is still the main raw material used in tire manufacture today, it is part of a complex compound of ingredients with each manufacturer employ-ing a variety of formulations to create tires to meet specific demands, including go-carts and automobile touring applications; snow tires, all-weather tires, off-road and racing tires; and intercontinental truck transporters and giant earthmoving equipment tires. A major synthetic material used in tire production is styrene butadiene rubber (SBR), which is produced from two gases that are by-products of petroleum refining: butadiene and styrene-mixed in the presence of soapsuds. Synthetic butyl rubber is used to line the inside of tires because it holds air better than SBR. Today's complex compounds of natural and synthetic materials have a number of advantages over pure natural rubber—they hold air better than natural rubber and are excellent at resisting aging, weather, chemicals, moisture, ozone, extreme temperatures and tearing.
Tread is formed by extruding, or pushing, rubber through precision-formed dies, while plies and belts are made from polyester cords and steel strands encased in a resilient rubber compound, which are formed into continuous sheets about sixty inches wide and rolled onto giant rollers. The plies and belts are cut from these fabric rolls. The tire bead is formed with high-tensile steel wires, coated with bronze, then covered with rubber and wound into rings called bead bundles.
To make the tire, various raw materials—synthetic and natural rubber polymers, special oils, chemicals, and carbon black—are mixed and kneaded under pressure into a smooth blend in a machine called a Banbury mixer. Sulfur, peroxide, or Bisphenol are commonly added to natural rubber during the vulcanization process to improve the resilience and elasticity of the rubber. Internal mixers, commonly used in plastic and rubber processing, also are used to reduce dust and fume hazards for factory workers.
Radial tires are built in a two-stage assembly. First the tire body is formed using beads, inner liners, plies, and sidewalls that are precisely placed by skilled workers. The tire is known as a green tire at this stage. In the second stage, the assembled belts and tread are applied to the tire body. The tire is cured—a process often called vulcanization—in a donut shaped mold in which a rubber bladder inflates, forcing the green tire to conform to the tread and sidewall pattern required for whatever type tire it is designed to be. Controlled pressure and heat are applied, again depending on the requirements of the tire design, which binds all of the components together. Each tire is visually and physically inspected at the end of the curing process.
Most tire manufacturers are vertically integrated since they not only manufacture tires but own or control virtually everything from raw material production to final product distribution. As early as the 1920s, Bridgestone, for example, was leasing rubber plantations in Liberia and established a chain of auto supply and service outlets to sell its tires and most of the other major producers have followed suit.
New passenger car and light truck tires, which comprise the bulk of tire sales, are shipped to vehicle manufacturers, distributors, or directly to large retail outlets. Only 25 percent of these new tires are installed on new vehicles; the other three-quarters are sold as replacement tires. Most car and light truck owners purchase replacement tires with the same brand and style as the original tire, so while original equipment is a small percentage of sales, it drives the choice in the larger purchase of replacement tires.
Distribution networks for replacement car and light truck tires in the United States are regional, highly fragmented, and can be very complex. Tire manufacturers ship tires to wholesale distributors, who in turn sell tires to a varied assortment of retail tire dealers. Some tire manufacturers skip the wholesale distributors and sell tires directly to their own or other large independent tire retailers. Profitability depends on sales volume and efficient operations. Distribution networks for commercial tires follow the same general pattern, although the outlets are specific to the commercial markets, such as Wingfoot Commercial Tire Systems. Wingfoot is a joint venture of Goodyear and Treadco created in 2000 to sell and service commercial tires of Goodyear and other manufacturers, including new, used and retread tires.
Tire distributors can be owned by the tire manufacturers or may exist as independent establishments. The U.S. market had revenues of $12 billion in this market in 2006, with 1,500 companies active in the market. Larger wholesalers typically have a network of ten centers with the top fifty companies generating half of the market's revenue. Approximately 60 percent of passenger automobile tire sales are premium manufacturer brands, 20 percent by economy manufacturers, and 25 percent by private label manufacturers.
The relationship between the distributor and the tire retailer is critical. Tires come in a wide selection of sizes and tread, and are bulky and expensive to store so retail dealers resist maintaining large inventories and instead rely on distributors for wholesale price consistency and efficient delivery. In the meantime, a trend toward value-added service has evolved between distributors and many small independent tire dealers in competition with large retailers such as Costco and Wal-Mart. In these cases, the distributors provide services to the independent dealers, such as warranties, credit, advertising, plus sales and technical training in addition to a reliable price and delivery to the auto service shop owner.
Michelin owns three large distribution networks: Euromater and Viborg in Europe and TCI (Tire Centers Incorporated) in the United States. American Tire Distributors, one of the largest independent distributors in the United States, offers the big industry leader brands from Bridgestone, Continental, Goodyear, and Michelin, in addition to less expensive brands and private label tires. While most U.S wholesalers have several distribution centers spread across a region, American Tire Distributors has a broader geographic sweep than most with 75 distribution centers in 35 states from coast to coast.
Some distributors also sell and service tires in the retail market. TBC Corporation, the largest North American private-brand tire distributor, is an example of a distributor that also operates its own retail franchise. In addition to a retail network spanning North America, TBC operates Big O Tires franchise stores and sells tires through several other retail chains, such as Tire Kingdom and Merchant's Tire and Auto Centers.
Retail tire dealers vary in ownership structure and size. Like tire distributors, retail dealers can be owned by tire manufactures or may exist as independent establishments. The U.S. market had revenues of $20 billion in this market in 2006, with approximately 10,000 companies active in the market, although the top eight dealers generate one-quarter of the market's revenue. Profitability depends on business volume and competitive pricing.
Tire Business, a trade journal that publishes a summary of average attributes of the largest 100 tire retailers, reported that many of these establishments offer automotive service in addition to tire sales. Revenue is divided with 55 percent from tires, 40 percent from automotive service, and 5 percent from other services or products. Many dealers are chain retailers, each operating forty-two stores on average. Typically the companies are privately held, and are very often family run. Goodyear was the number one brand sold, with seventy-five of the top 100 dealers offering the brand. Michelin was second at sixty-seven dealers handling its tires; and Dunlop was third with sixty dealers.
Retail units of Goodyear and Bridgestone are two of the largest retail sellers, with Bridgestone considered the largest. Top independent tire retail companies active in the market include TBC Corp., Discount Tire, and Les Schwab Tire Centers. TBC operates over 600 outlets across the United States under the names Tire Kingdom, Merchant's Tire, and NTB (National Tire & Battery), which was purchased from Sears in 2003. Discount Tire also has approximately 600 stores in eighteen states. Retail distribution is more concentrated in the Pacific and Northeast areas in the United States.
Of the more than one billion new car and truck tires sold around the world each year, 72 percent are sold to consumers as replacement tires for existing cars and trucks—802 million tires of a total 1.1 billion car and light truck tire sales in 2006—according to the 2007 edition of Michelin Factbook. Tires designed for commercial trucks have an even higher rate of replacement. Of the total 166 million commercial truck tires sold around the world in 2006, 85 percent of them (141 million) were sold as replacement tires for commercial trucks and busses.
Another group of tire users includes those who operate vehicles such as boat and other recreational vehicle trailers, farm equipment, motor cycles, three- and four-wheelers, bicycles, golf carts, and large mining machinery. Together, this varied assortment of vehicles with tires accounts for a small percentage of all tires, although a large number of tire models.
With the exception of high performance and other specialty tires, most consumers prefer to purchase the same type and brand of tire that was original to their vehicle. During the life of an average car or light truck, three sets of replacement tires may be purchased before the vehicle is scrapped. Commercial vehicles will generally go through much higher numbers of replacement tires, especially 18-wheel commercial carriers which accumulate hundreds of thousands of miles of service, resulting in several times as many tire set changes as a typical non-commercial vehicle and for many times as many tires.
Since the tire industry is nearly synonymous with the automotive industry—cars and trucks consume nearly 90 percent of the tire industry's output—it is closely aligned with the automotive supplier industry and automotive aftermarket. Consequently, when new car sales are down, the tire industry doesn't necessarily suffer greatly since aftermarket sale of replacement and repair parts tend to rise as older vehicles are kept in service longer. The same relationship between vehicle sales and tire sales is reflected in heavy truck tire sales. However, the sale of replacement tires for commercial trucks will tend to decline during slow economic periods as a result of the declining number of miles traveled by commercial vehicles as a consequence of reduced economic activity.
The motor vehicle parts industry is nearly the equal of the motor vehicle manufacturing sector in the United States, according to the U.S. Census Bureau's Annual Survey of Manufactures: 2005, with total shipments of parts and components of $206.34 billion. This includes everything from gasoline engines and chassis components to seats, interior trim, as well as electronic and electrical equipment.
Other markets closely related to the new tire industry are those for retreaded truck tires and those related to the scrapping and recycling of worn-out tires. Retreading has been around since late in the nineteenth century, an offshoot of developments in the repair of pneumatic tires and the introduction of the vulcanizing process. Retreading emerged as an important industry during the twentieth century in response to the high cost of raw materials needed for new tires, plus the environmental impact of worn out and scrapped tires. In large transportation fleets, airline companies, public transit buses, and trucking companies, tires are the third highest expense after labor and fuel costs. In the trucking industry alone, retreaded tires represent a savings of over $3 billion annually for truckers and trucking companies in North America.
Worldwide, Bandag is the leading truck tire retreader, serving truck fleets through nearly 1,000 franchisees in some 100 countries. It has over 1,600 sales and service locations in North America. Now a wholly-owned subsidiary of Bridgestone Tire, Bandag was founded in 1957 and is headquartered in Muscatine, Iowa.
Goodyear has the next largest market share among the top fifty retreading firms with eight affiliated dealers. Michelin has seven retreading affiliates under the name MTVI. The retreading process involves stripping away some layers of the used tire. New layers are rebonded onto the casing and new tread is etched onto the tire. Retreaded tires are rebuilt and cured in a process similar to the original process for tire manufacturing.
Scrap Tire Problems
The disposal of worn out passenger or light truck tires is an important part of the lifespan of a tire, and several recycling industries have emerged in response to the difficulty of tire disposal. Rubber from scrap tires was routinely recycled until the 1960s. However, recycling efforts slowed as cheap oil imports—the raw material behind synthetic rubber—made reclaimed rubber less valuable. As well, the spread of steel belted tires made tire recycling more expensive, more difficult, and time consuming.
As a result, scrap tires began to accumulate. Tires began to pile up in landfills. The tires can potentially damage the linings of landfills that keep groundwater and surface water from mixing with landfill contaminants. Some tires are illegally discarded, creating eyesores and dragging down property values on surrounding land. Discarded tires gather water. Such stagnant pools are breeding grounds for mosquitoes and other pests. If a pile of tires catches on fire, it can burn for months. The smoke that such a fire emits is foul smelling and the fumes contain toxic chemicals that can travel many miles
By 1989 only 10 percent of the scrap tires generated in the United States were reclaimed through recycling and other uses, such as retreading. By then the problems posed by scrap tires had become acute and industry, government and civic officials, separately and in concert, developed programs to address the issue. In Ohio, for example, the state legislature ordered government agencies to clean out existing tire piles and to develop recycling markets extensive enough to accommodate all of the state's newly generated scrap tires. That same year, the Rubber Manufacturer's Association (RMA) created the Scrap Tire Management Council (STMC), a non-profit advocacy organization that operated as part of RMA to provide policy direction and guidance for the association regarding scrap tire management. Among the committee's strategic goals was the elimination of all scrap tire piles, the promotion of sound management of all annually generated scrap tires, and the implementing of helpful legislation.
By 2005 the United States consumed 259 million scrap tires in end-use markets, the RMA reported. End uses included tire-derived fuel, civil engineering and ground rubber applications. Other smaller markets and legal landfills consume the remaining annually generated tires.
Tire-derived fuel (TDF) is used as a cleaner and more economical alternative to coal as fuel in cement kilns, pulp and paper mills, and industrial and utility boilers. Approximately 52 percent of the total scrap tires generated each year in the United States are consumed as energy in this way. Civil engineering applications are another use for scrap tires. These uses, which account for 16 percent of the nation's annual scrap tire supply, include such applications as tire shreds in road and landfill construction, septic tank leach fields and other construction applications. The tire material adds beneficial properties in these applications, including vibration and sound control, erosion and landslide prevention, and drainage facilitation in leachate systems. Ground rubber applications account for another 12 percent of the scrap tires. These include new rubber products, surfacing of playgrounds and other sports fields, and rubber-modified asphalt.
The RMA reported that at the end of 2005, 188 million scrap tires remained in stockpiles in the United States. This was a reduction of approximately 81 percent since 1990. RMA credits this progress to state efforts to abate stockpiled tires, develop sustainable scrap tire markets, and enforce existing scrap tire laws and regulations. The remaining stockpiles are concentrated in seven states: Colorado, New York, Texas, Connecticut, Alabama, Michigan and Pennsylvania. These states accounted for 85 percent of the remaining scrap tire stockpiles, and the RMA reported that it was working with legislators and regulators in these states to develop remedial programs.
RESEARCH & DEVELOPMENT
Most research and development in tires is focused on improved durability, fuel efficiency, and safety. This is where two of the more dramatic advances have been made. The first is tire pressure monitoring systems, which assure correct tire inflation at all times by sensing tire pressure and relaying the information to the driver via an instrument panel alert. Second is the run-flat tire, which can continue to function normally, allowing the driver to safely exit traffic after a puncture leads to a sudden loss of tire inflation.
There are two basic types of run-flat tires. One is the low-profile tire, which has very stiff sidewalls that can support the weight of the vehicle in the event of pressure loss. The other style, invented by Michelin, is called the PAX system. This is a tire/wheel package that consists of four components: a tire, a wheel, an inner support ring, and a tire-inflation monitor. If the tire loses pressure, the inner support ring that runs around the circumference of the wheel supports the load. A special tire bead also helps lock the tire to the wheel during pressure loss.
Efforts have also been underway to develop a commercially viable run-flat polyurethane tire that can be produced in a fraction of the time required to make a rubber-based tire, which requires a lengthy curing process. Polyurethane tires developed in the past have failed to pass Federal Motor Vehicle Safety Standard No. 109, a critical performance standard, although one developed by the Amerityre Company under an agreement with Goodyear passed the federal testing criteria successfully. Whether the industry is ready to make the investment in the infrastructure necessary to produce urethane tires in any significant volumes remains to be seen.
|R&D spending is presented as a percentage of Net Sales.|
|Company and Country Headquarters||Percent of Net Sales|
|Goodyear (United States)||1.9|
All the major manufacturers invest in the exploration of advanced technologies to develop lower cost, more puncture-resistant material formulations; faster, more efficient production methods and manufacturing processes; and cooler-running, safer, and more rolling-resistant tread designs. R&D expenses of the major manufacturers range up to four percent of group net sales as can be seen in Figure 208, which provides R&D spending by five of the largest tire makers worldwide.
A number of current developments in the tire industry are indicative of where the industry may be headed in the future. The most obvious is the requirement that tire pressure monitoring systems be standard equipment on all light vehicles sold in the United States after September 1, 2007. This was mandated by the U.S. Congress in the Transportation Recall Enhancement, Accountability and Documentation Act (Tread Act) adopted in late 2000. This legislation was passed as a safety measure following the recall of 6.5 million Firestone tires in North America earlier that year due to a rash of accidents and deaths attributed to Firestone tire failures on Ford Explorers.
Run-flat tires also required tire pressure monitors to alert the driver to a loss of air pressure in the event of a puncture or other tire failure. Another development that has emerged in response to the high cost of run-flat tires is temporary mobility kits (TMK), or "fix-a-flat" kits. TMKs consist of an aerosol can containing compressed air and liquid rubber that can be connected to the tire's valve stem and activated to inject air and rubber sealant into the tire, sealing the air leak and giving the tire enough inflation to get the vehicle to a service station.
Another trend has been the introduction of light truck tires with both heavy-duty load ratings and passenger car comfort levels. Previously, pickup truck and SUV owners had to choose between soft-riding passenger car tires that could not handle heavy loads, or hard-riding, noisy truck tires. The new, more advanced tires blend the desirable characteristics of both car and truck tires so the vehicle can deliver both comfortable ride qualities and load carrying and towing capabilities.
Nitrogen, rather than compressed air, has emerged as an alternative inflation source for some car and truck owners. Nitrogen inflation has been used in race cars, mass transit, and military vehicles for many years, but is rare in most highway vehicles due to the cost and lack of infrastructure. It does offer several benefits, however, chiefly safety. Oxygen is flammable and fuels a fire in the event one occurs in the vehicle, hence its appeal for race cars and military vehicles. Nitrogen, unlike oxygen, tends to moderate or suppress fire. Other benefits of nitrogen inflation include better pressure retention, better fuel economy, extended tire life, and less corrosion of wheel and tire components. Its environmental benefits alone could increase nitrogen's attractiveness and generate a market demand leading to increased availability.
TARGET MARKETS & SEGMENTATION
The tire markets of the world can be subdivided into a variety of segments based primarily on the type of vehicle they are intended to equip; then further subdivided within each of those segments according to how the vehicle is to be used. Passenger cars and light trucks are the dominant market targeted by the tire manufacturers of the world since these vehicles account for more than 60 percent of global tire sales. Commercial trucks are the other major market for tires, representing another 27 percent of global sales.
In the car or light truck market, for example, tire selection may be dictated by how often the car is used and where the vehicle is typically used. Northern regions of the United States, for example, see snow and would perhaps need snow tires. Tires for commercial vehicles, agricultural vehicles, aircraft, or motorcycles are designed to best suit the particular vehicle's needs. Such tires might emphasize durability or vehicle traction on rocky surfaces.
RELATED ASSOCIATIONS & ORGANIZATIONS
China Rubber Industry Association, http://www.cria.org.cn/English
European Tyre Recycling Association, http://www.etra-eu.org/
International Rubber Consortium Limited, http://www.irco.biz/
International Tire and Rubber Association, http://www.itra.com
Japan Automobile Tire Manufacturers Association, http://www.jatma.or.jp
Rubber Association of Canada, http://www.rubberassociation.ca
Rubber Manufacturers Association, http://www.rma.org
Tire Guides, Inc., http://www.tireguides.com
Tire Industry Association, http://www.tireindustry.org
Tire Retread & Repair Information Bureau, http://www.retread.org
Tire and Rim Association, http://www.us-tra.org
The Tire Society, http://www.tiresociety.org
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