New Discoveries and New Investments for Leading Tire ManufacturerTue, 09/15/2015 - 13:48
Q: Goodyear tires are installed within all automotive segments, but which is the most lucrative in Mexico?
A: Our strategy is to handle each segment with a different business model. The market that has presented the highest domestic growth is the consumer sector, particularly focused on light vehicles, light trucks, and SUVs. Part of the reason for this is the evolution of Mexico’s vehicle park and the investments entering the country. Mexico’s gain in momentum has, over a two-year period, enabled us to double our market share in the consumer sector. Domestic demand has accelerated the evolution of Mexico’s vehicle park, which, for many years, has been dominated by older vehicles. Therefore, Goodyear is focusing on innovation and technology to prepare for the significant opportunities that will arise over the next five years.
The most popular tire size in Mexico is for a 13-inch rim. For the last 20 years, this has been the number one SKU size in terms of volume, representing 44% of the total market. Nowadays, this tire represents less than 20% of the market and five years from now, it will be less than 8%. The reason for this will be the new production of cars with 15-inch rims and above, leading us to the projection that 17-inch rims and above are the ones that will soon grow fastest in the industry.
Q: Since Goodyear Mexico closed its original production plant in 2001, what led to this year’s announcement to open a new one in San Luis Potosi?
A: Future demand will require products with greater added value, for which new production technology is needed. Our new plant will supply the Americas, and will be the finest Goodyear plant in the world, only producing the most innovative tires. We expect to begin production in 2017 when we will produce approximately 6 million tires. It will be exciting to be able to satisfy future demand and show our commitment to the development of the industry. As a global company, we already have R&D and innovation centers in four global locations. However, this new plant will be the most advanced, with the latest technology and closely related to all these research centers. The plant will also contribute to job generation; it is expected to create approximately 1,000 direct jobs. The investment required for the first stage will be between US$500 million and US$550 million, which would be one of the most significant investments in the tire industry.
Q: What advantages can Goodyear offer its customers that distinguish the brand from its competitors?
A: In terms of the average age of the cars and their rapid evolution in the current market, the complexities of the vehicle park in Mexico demands a comprehensive product portfolio from us. With our current offering, we are capable of satisfying 95% of the market. To achieve this, we will need a portfolio with over 1,000 SKUs that is completely targeted toward the local market, so we launched 12 new product lines between June 2013 and June 2014.
Additionally, there is no way we can succeed in this business without a solid distribution network. For that reason, we have spent a lot of time and resources on becoming a customer- focused company. Thanks to our long presence in the country, we have a strong connection with our dealers who are now entering their third generation of owners, and we help them obtain the necessary abilities to properly function within the market. We are also working on non-traditional channels, such as mass merchandising and vehicle dealerships, where we now have an important presence.
Q: What progress have you made in your social responsibility initiatives in Mexico?
A: The most important program that we have at the moment is the collection, warehousing, and transportation of used products that will later be used in cement production. While we are one of the key players in this project, this has been a sector effort in partnership with the federal and local governments. We are also involved in the communities surrounding these projects to improve the quality of life for the local population.
Last year, we started producing silica from rice peels, as a group of engineers found that they could produce energy by burning this product. Every year, tonnes of rice grains are consumed and their peels are discarded, but Goodyear found that after burning the rice the ashes can be recycled to produce silica, which is a fundamental component of tires. There has been a lot of research into this discovery, and we are now producing the first tires made from rice silica in Asia. This is an important example of our commitment to sustainability and social development and we hope to implement this in Mexico. We are taking this project very seriously and will continue to process all the products that have reached the end of their life cycle responsibly.
Q: What are your general short-term predictions for the automotive industry?
A: The forecast is that there will be stable growth across the industry. Last year, Mexico produced 3 million cars and is expected to produce 5 million units by 2020. Obviously, this will impact the tire industry, so we are also expecting considerable growth in the production and replacement sectors.
Another important factor will be the national economy. The last two years were not as profitable as everyone expected, but sooner or later GDP will have to pick up and return to 4% growth, which will accelerate the growth of the tire industry. Additionally, as the US economy recovers, this will motivate expansion in Mexico, which is why we are optimistic as we reinforce our commitment to our customers. Goodyear has been in Mexico for 75 years and is proud to say that the company has helped the industry to become what it is today.