Despite a tough commercial tire market in 2023 due to overstock and the effects of a rubber-banding supply chain, some tire manufacturers are expressing a cautious optimism for stabilization and gradual recovery through the rest of 2024 and into 2025.
“The economy is not showing signs that it’s going to slow down, but I don’t think the situation’s going to improve dramatically by the end of this year. It’s more likely next year,” said Pierluigi Cumo, Vice President of B2B products, at Michelin North America. “We can see the light because the beginning of 2023 was very bad. I think now we’ve found the bottom, and I don’t think we’re going to get much further from the bottom in 2024.”
Cumo took the stage during the company’s Sustainability Summit in Sonoma County, Calif. Read on for Cumo’s thoughts on developing sustainable tires for commercial fleets and whether Michelin’s product development and release strategy is influenced by market conditions.
Where the commercial tire market is right now
“The biggest thing right now is just where the market is versus where the market has been,” Cumo said. “When we think about COVID-19, it was crazy for everyone in many ways. I think the transportation industry saw peak and unheard-of demand during those years. At the end of 2022, that very quickly fell off. Around October or November of 2022, it fell dramatically. And throughout last year, we were seeing double-digit declines in the replacement tire market, which obviously comes down from how much the vehicles are actually being used.
“Freight demand decreased dramatically, and what we see this year is a similar pattern. So, they reset the baseline and now they’re moving at a lower point, a bit above where they were in 2019, but massively below where they were the years after that.”
I think that’s true for other segments that we’re in, although maybe travel’s the exception because they saw a decline and now they’re seeing a peak,” he continued. “But, we see a similar dynamic and very strong acceleration and deceleration. When we get to today, they’re more thinking about how they will make it through this year, or the next year. Shipping rates are much lower than they used to be, which means that their profitability and their margins are much lower.”
How developing sustainable tires for commercial applications impacts a company’s sustainability strategy
“When you talk about BEVs, fleets that have a more regional, local application are probably the ones that can actually have a conversation on total cost of ownership to make it viable,” Cumo said. “Last-mile delivery fleets are probably in the best position to have a conversation like that because they have somewhat predictable, short routes. They’re going back to their depot every day and they’re close to an urban center, which means they probably have more access to infrastructure than elsewhere.
“As you start drifting away from that, it becomes more and more complicated to enable that operation to sustain that strategy and make it cost-feasible. When you look at long-haul, battery-electric is nearly nonexistent. If you have the conversation with the city folks, they’ll talk about how well-suited hydrogen is for long-haul applications and the work that’s being done in that space to make that a reality, but then you have to think about how to distribute hydrogen and how to make that viable, and how to make that green.”
