Technavio has published a new report on the global tire logistics market from 2017-2021. (Graphic: Business Wire)
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Technavio has published a new report on the global tire logistics market from 2017-2021. (Graphic: Business Wire)
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LONDON—Technavio market research analysts forecast the global tire logistics market to grow at a CAGR of close to 6% during the forecast period, according to their latest report.
The market study covers the present scenario and growth prospects of the global tire logistics market for 2017-2021. The report also lists original equipment tire manufacturers (OEM), and aftermarket as the two major end-user segments. OEMs accounted for approximately 28% of the global tire logistics market in 2016, as compared to around 72% for the aftermarket players.
According to Jhansi Mary, a lead analyst at Technavio for logistics research, “Most of the demand for the global tire logistics market is expected to come from APAC, especially from China, India, and Japan, where the automotive industry is growing at a rapid rate when compared to mature markets such as the US and Western Europe.”
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Technavio analysts highlight the following three market drivers that are contributing to the growth of the global tire logistics market:
- Upward trend in global automotive sales
- Higher profit margins for replacement tires
- Increase in tire production due to declining rubber prices
Upward trend in global automotive sales
The growth in manufacturing industries, such as automobile production, electronic product shipments, and the food and beverage industry will benefit the spare parts market.
There has been a substantial increase in the global automotive manufacturing market with APAC dominating it. This will provide several benefits to logistics companies, which will eventually fuel the spare parts logistics market. Automotive manufacturing companies are adopting supply chain methods such as JIT and Kanban, which ensure the seamless transportation of inventory, and outsourcing of logistics services to contract logistics companies, hence driving the logistics market.
“In addition, sales of electric vehicles are expected to rise due to the increase in emission regulations imposed by governments worldwide and the reduction in battery prices. Hence, the growth in the automobile industry is expected to boost the tire logistics market during the forecast period,” says Jhansi.
Higher profit margins for replacement tires
In mature markets, such as the US and Europe, the revenue generated from the replacement tires business is in the 30%-35% range. The supply chain is very well established in these markets to reach healthy profit margins, which can be 60%-70% higher than traditional vehicle sales.
The potential of the replacement tires market has yet to be completely utilized in APAC as the key areas of spare parts logistics are not efficient. Over the past few years, China has maintained its position as the world's second-largest automotive market. The market in India is dynamic and is rapidly growing, and many auto OEMs are entering the market to tap this potential.
Increase in tire production due to declining rubber prices
The profile of the tire manufacturers has improved because of increased global vehicle production, the rise in older vehicle numbers leading to high volume sales, and falling rubber prices, leading to higher profit margins. The rubber industry has witnessed a steep fall from 22 basis points (bps) in early 2016 to 4 bps in late 2016 as profitability and liquidity levels improved. Hence, the outlook for tire manufacturers looks positive, with lower raw material costs and higher demand for logistics services.
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About Technavio
Technavio is a leading global technology research and advisory company. The company develops over 2000 pieces of research every year, covering more than 500 technologies across 80 countries. Technavio has about 300 analysts globally who specialize in customized consulting and business research assignments across the latest leading edge technologies.
Technavio analysts employ primary as well as secondary research techniques to ascertain the size and vendor landscape in a range of markets. Analysts obtain information using a combination of bottom-up and top-down approaches, besides using in-house market modeling tools and proprietary databases. They corroborate this data with the data obtained from various market participants and stakeholders across the value chain, including vendors, service providers, distributors, re-sellers, and end-users.
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