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16 • Focus on
the value of the rand versus the Euro and US dollar, thereby impacting
cheap imports from Asian countries which are subject to 30% duty and
currency movements such as the yen to the rand. This could actually
help local producers by narrowing the gap between cheap imports and
locally-made tyres.”
Agrees Ceneviz, but cautions: “I think cheap imports won’t grow and
might even decline since the rand devaluation has put pressure on
imports in general. That said, the excess of production capacity around
the world is another factor to be considered since manufacturers will be
happy to export products on a marginal cost basis to keep their factories
running to capacity.”
Concurs Jordaan: “Cheap imports will always present a great challenge
in that they occupy a high share of the growing market where consumer
need is for a cheap product and where brand or performance is not part
of the buying decision. I believe that cheap imports will find a way to keep
and even grow their market presence.”
OE versus replacement
A dramatic decrease in the number of new vehicles sold will undoubtedly
impact tyre sales to OE (original equipment) this year. According to
Continental - an important contributor to the OE sector – OE sales are
expected to drop by 20-30% this year, but they say the drop could be
even more dramatic.
Further suggests Marchi: “The global estimated effect will likely equate to
an overall decrease of between 15-18%. Pirelli’s goal is to create value by
confirming the selective partnership strategy in OE, focusing on quality
and profitability. In addition, we will continue reinforcing our leadership in
the high performance sector in the replacement market.”
Says de Villiers: “The demand for new vehicles in South Africa has
tapered down to the 2005 level of sales. There is clearly an impact as
OEM’s are adjusting structurally to ensure their business is sustainable
during the global economic tightening. In South Africa in particular, whilst
reportedly endorsed by the Minister of Finance in his budget speech, the
prospective buyer is subjected to the National Credit Act which has a
significant impact on the rate of financing by banks.”
Adds Jordaan: “On the positive side, the reduction in OE volume will
mean that more key sizes will be available to be sold into the replacement
market (there has been a shortage of key sizes especially in the high
performance market segments).”
Solid tyre retailers are likely
to weather the storm.
So while some of the shortfall could possibly be absorbed by the
replacement sector, the question is, will it be enough to negate the losses
incurred through poorer OE performance? Time alone will tell.