Michelin set to squeeze low-end tyre brands

MICHELIN Australia has trended above the French tyre giant’s average global growth after posting a fifth straight year of increased sales revenue, which according to a local executive owes largely to a booming new sportscar market.

Speaking with GoAuto at the international media launch of the company’s new Pilot Sport 4S in Abu Dhabi last week, Michelin Australia marketing manager Tim Hoare said the thriving sportscar market was playing into the hands of a tyre brand long focused on the performance sector.

“Cars are becoming a lot more affordable, you are seeing a lot more of these (performance) cars on the road,” he said.

“So we’re in a quite fortunate position as well, where we’ve always focused our message is now the most growing segment (high-performance cars).

“This is where we excel, and the market that we’re basically trying to (attract) … the people who are passionate about their tyres, it is a niche market, but it’s growing in tyres.”

Globally, Michelin sales revenue increased by 10 per cent in the 2016-17 financial year, with a 31 per cent growth in the premium tyre segment defined as 18-inch diameter or larger. Michelin Australia was, however, running above the average.

“Everyone’s moving away from the smaller rim sizes, so 17 inch is now standard on a lot of vehicles, so there is a lot more opportunity,” Mr Hoare said.

“Michelin (sales volume) is up 10 per cent globally for quarter-one 2017, so it’s a very good trend globally. In Australia, last year was a record sales landing, and so we’ve had five consecutive years of significant growth year-on-year.

“Our volume last year was more than ‘plus-10’ (per cent), and our bottom line was more than ‘plus-10’ (per cent). We form part of the Asia zone and the Asia zone is the best-performing globally for Michelin, and (there are) signs again that for 2017 we’re above the global average.”

Mr Hoare added that Michelin had gained ground thanks to changing sportscar buyer trends that meant while “it used to be around 60 per cent of consumers would stay with the OE (original equipment) tyre, now, depending on who you speak to, it could be as low as 40 per cent”.

He admitted that Michelin was not as strong in OE as it could be, so it was pleasing to see tyre buyers shopping around for other alternatives.

“One of the places where we’re probably weaker is on the OE side, so especially in Australia Bridgestone and Goodyear are very strong in OE, but more and more people are taking the tyre and replacing it,” he said.

A key issue for the brand, he argued, was not so much convincing buyers to spend more on a tyre than key competitors, but rather providing “education” highlighting that buying a Michelin tyre is no longer as expensive as it once was.

“The Michelins of the world aren’t actually that much more expensive than a lot of the other brands as opposed to what they used to be,” he said.

“A little bit of it is actually education, because a lot of people assume that the Michelin product is out of reach, when the reality is it’s not.

“You’re always going to have the people who don’t fully appreciate the value of a tyre and that’s our biggest challenge. How do you show someone $50 per corner? It’s an argument you’re not always going to win, and we understand that, but the way that the market is going is the premium manufacturers – so ourselves, even the likes of Continental and Pirelli – sales are all increasing.

“In the past, what we call ‘tier one’, we used to all be fighting over a smaller piece of the pie … but over the last probably five years, car tyres have actually become a lot more affordable.”

Although Michelin considers itself a ‘tier one’ player in the new tyre market along with Bridgestone, Pirelli and Continental, Mr Hoare opined that it was ‘tier two’ brands that were now most pressured in the tyre market.

“What we’re seeing is budget brands are always going to come in, ‘tier three’ will always come in, they’re very opportunistic, they’re seasonal, they come with the changes in currency,” he started.

“The ones in the middle tier, which are the ones like Maxxis and Dunlop and Kumho feel a little bit of a squeeze, because they don’t have the performance of a tier one or the affordability of tier three.

“All major manufacturers, so Bridgestone, Pirelli, Continental and us actually reduced our prices significantly about three years ago, so that argument (that Michelin tyres are expensive) is sort of decreasing a bit now.”

He further noted, however, that “it’s such a competitive market that no one really dominates at the top of the tyre market because it’s really competitive”.

This has led Michelin Australia to place a greater emphasis on direct marketing rather than spruiking its tyres through retailers that sell several brands.

“What you’re finding is sometimes it’s dealer driven, so what we try to do now with our marketing is, as best we can, we realise that the dealer has a huge influence, so we've got to find a way to go around the dealer and actually talk to the consumer ourselves,” Mr Hoare said.

“If we leave it to the retailer then there’s every chance that it might not end up on our side.”

But Michelin Australia has not finished capitalising on the sportscar trend. In renaming the Pilot Super Sport the Pilot Sport 4S for its latest generation, it more obviously sits above the Pilot Sport 4 but below the Pilot Sport Cup 2.

It leaves room for a Pilot Sport SUV model to replace the current Latitude range and capitalise on the high-riding high-performance sales boom.

“The next step is moving into SUVs, high-performing SUVs,” Mr Hoare revealed.

Michelin engineering support and operational marketing manager Charles Donahoe added: “What we’re really leaving room for is a consistent Pilot Sport range.”“Pilot Sport 4, Pilot Sport 4S, Pilot Sport SUV, this is the direction we’re trying to go in,” he said.