In September we were able to carry out an in-depth interview with Guy Heywood, Hankook’s Marketing and Strategy Director for TBR in Europe about how Hankook have tried to maintain stability in the market during the pandemic, their future direction, as well as the challenges commercial tyre dealers and retreaders will face in the future.
Hankook's Marketing Strategy Explained
Starting with how the Covid-19 crisis has affected the industry, Heywood was quick to explain that the pandemic has had a profound effect on the mobility industry. With the lockdown affecting transport in general, tyre sales in the last quarter were the worst in the history of the industry, based on the experience of manufacturers. This year, sales of new tyres in Europe have reduced by 13% whilst retread sales fell by 14-15%. April was the most hard-hit month with a drastic 40% drop in the European TBR market. Heywood, however, was quick to point out positive signs of recovery, noting that July only produced a drop of 4%. Hankook incorporates 53 countries within its European region, something Heywood notes makes for varying results of recovery.
Heywood states that he is particularly proud of Hankook’s response to the pandemic, noting that the safety of the company’s customers, staff and partners was of paramount importance and that the company reacted quickly by introducing lockdowns and remote working. Following on from these initial changes, the company has focused on a business continuity strategy by making sure its fleets and partners have been able to keep their businesses running, especially with essential services such as food delivery, fuel delivery, the delivery of medical supplies and the transport of workers to and from their places of work. Heywood explains that keeping this part of the business running during the deepest part of the lockdown was challenging, but something with which the company achieved success.
The third phase for Hankook was the process of returning to more stabilised working conditions. Heywood explains; “In the lockdown period, we had to have a strong recovery plan, which involved a back-to-work plan, but also a back-to-business plan, which I’m pleased to say is going very well. Sales and market share growth since April has been strong with projections for September also positive.” Heywood also pointed out that Hankook are not altering the strategic plans set in 2018, as they were satisfied with how they performed in 2019 and are confident that the plans will continue to provide success in the future. The tactical plan for 2020 is also continuing, examples of which are the launch of the company’s Tier 2 Laufenn offer, Investment in team resources and further investment in their retread offer.
Looking forward, Heywood forecasts a strong recovery, acknowledging that while the pandemic may produce a ‘second wave’, restrictions are currently more regionalised in nature, leading to the expectation that the company should end the year less than 10% below its original growth plans for 2020, a result which he describes a “very, very good.”
Heywood was then asked about Hankook’s medium term strategy. The company is in a huge period of transition, he explained, and the plan is to adopt a more multibrand approach that also incorporates retreads, multiple access to market, as well as higher technologies. “Our aim is to put more offers on the table, to ensure our customers can access these offers, and to make sure we operate as efficiently as possible, whilst delivering an excellent level of service,” he explained.
For our next question, we asked for Heywood’s analysis of the impact on the European truck tyre market over the last year of key events such as the introduction of tariffs on Chinese tyres, as well as various availability and supply issues.
The anti-dumping tariff, he said, had a limited effect on the market. In 2017 there were 6.7 million tyres brought into Europe from non-European sources, but this only fell to 6.2 million in 2018 and 6.3 million in 2019. However, what had changed was the composition, with the Chinese share falling from 58% in 2017 to just 15% last year. These were replaced by tyres from other non-EU countries,e.g. Vietnam and Thailand, so the expected large reduction in imports from non-European countries did not really materialise, and instead was replaced by a realignment in the origin of these low-cost tyres.
Another element that didn’t really change was an expected price increase, especially in the budget tyre segment. What actually happened was a 4% increase in 2018, followed by another price drop in 2019, meaning the anti-dumping initiative had a marginal effect both in terms of volume and price.
In 2020, however, there has been a significant impact on imports due to the early effects of Covid-19 shutting down factories. As a result, 2020 so far has seen an average of 300,000 tyres per month imported into Europe, compared with 525,000 in 2019, which when you consider that the overall market has fallen by only 13%, shows that the figures of the non-European manufacturers have been much more heavily hit than those of the ETRMA manufacturers. However, Heywood believes that these non-European manufacturers will recover their position, and that by the end of next year figures will revert to the levels that were being experienced in 2019.
In terms of trends, Heywood anticipates growth in both Tier 2 and Tier 3 brands, whereas premium tyres will remain static and even perhaps exhibit negative growth, simply due to the fact that many fleets do not have the cash now to buy the highest premium products. He also expects more fleets, dealers and governments will push more on environmental and ecological aspects, which will play into the hands of the retreading industry as well as result in an increase in regrooving. There will also be an increased demand for a reduction in CO2 emissions, which will result in an increased demand for tyres with lower rolling resistance.
Heywood also refers to the fight to provide better materials as a “real arms race.” Equally important is a push for new and better processes such as liquid mixing and the use of 3D-printed moulds, as well as developments in tread patterns such as regenerative tread patterns, which are important because they make sure that tyres retain their performance by maintaining grip and water evacuation later in life. The digital revolution is also offering opportunities in areas such as RFID, tyre pressure monitoring systems (TPMS), vehicle tracking and mobility solutions, which are resulting in tyre manufacturers transforming from being mere tyre producers to being mobility solution providers.
We also asked about changing business practices, which Heywood acknowledged has changed significantly. Virtual meetings have become more normal, with Heywood finding the virtual meeting a pleasant benefit of the pandemic. With dealer partners, Heywood believes virtual meetings will remain an effective means of communication. A key issue, however, is how to communicate effectively with smaller fleets with less than 20 drivers, as they are much more difficult to contact than large and medium fleets.
“Within the B2B arena, we need to prove to the large numbers of smaller fleets how we’re offering them value,” says Heywood. “That does take time and needs effective communication. In the past this meant our business account managers visiting fleets but today solutions are coming from Artificial Intelligence (AI) and CRM tools. These are especially effective because much of the time, the drivers are actually on the road, and have limited time to be contacted by us.”
Heywood believes the industry will be faced with a key challenge to effectively communicate the value of its products, and that the solutions will be found in people, technologies, using AI and using media, not just in printed form, but also be using more video media, webinars and the like.
Heywood concluded by explaining that there will still be room for the Hankook brand to grow in Europe, and the company will be looking for other opportunities and markets in which to grow. Tier 2 and Tier 3 tyres will continue to be desirable products for cash-strapped businesses, and this is where the growth is currently to be found, meaning that if Hankook want to continue to achieve growth, they have to develop an offering in the Tier 2 sector, which is where the Laufenn brand comes in. “The new brand, based on Hankook production quality, but at a Tier 2 price, offers an excellent proposition for this growing marketplace, and we are confident that it will help us to continue to deliver success in our European markets,” he concluded.