What’s on the minds of tire buyers and investors?

The sixth wave of the UBS Evidence Lab Tire consumer survey (close to 15k participants across 7 markets) shows that, despite hikes ranging between +25% (premium) and +40% (budget) over the past two years, "Price" maintained its second position (after "Safety") as the most relevant purchasing factor for consumers (mostly driven by China). We also note the trend has remained stable since 2019 and overall, this should reassure investors about tire makers’ ability to keep higher prices for longer in the near term and gives us comfort in our sector thesis that price/mix vs inflation will be a strongly positive contributor this year (mostly driven by more muted inflation than feared by companies).

Our consumer survey shows the growing relevance of “fuel” efficiency (+5%-pts since 2015). By 2030, we estimate that BEV tires will reach a penetration rate of c15%, including >50% in OE and c10% in RT. Overall, the EV shift should drive an annual growth rate of >30% between 2019 and 2030 and contribute positively to volume growth, price and product mix. Last year, we estimate EV-dedicated tires already represented <5% of passenger car sales (almost exclusively OE) for premium tire makers. We expect the positive financial contribution to become more visible from next year onwards. We are confident the EV tire market will remain controlled by Tier 1 players over the medium-term (as the differentiation between Premium and Budget increases - see our previous research work on the matter).

One key investor concern remains the risk consumers will switch towards lower tiers and less expensive brands. We reiterate that:

1. we have no tangible evidence this has ever been the case and 
2. it does not matter much for the profitability profile of the premium tire makers.