Micheldever Tyre Services (MTS) is urging tyre retailers to take advantage of unstable pricing at the budget end of the market and upsell mid-range tyres to offer consumers better value and maximise their margins.
The combination of rising raw material costs, Chinese pollution regulations and Brexit-fuelled exchange rate fluctuations have created a perfect storm for the budget sector. In recent months, budget tyre prices have been rising disproportionately compared with the mid-range and premium sectors, significantly reducing the cost price differential between typical budget and superior mid-range tyres in the same size.
Alan Baldwin, MTS sales director, comments: “With the difference between a budget and mid-range tyre now less than a fiver, it’s time for tyre retailers with a ‘that’s all my customers can afford’ attitude on price to change tack. With prices now so close, there really is a fantastic opportunity to offer a significantly better alternative for a negligible additional outlay. By doing so, garages are not only providing their customers with better quality tyres, but also improving their own profitability.”
Post-recession, the appeal of a Chinese budget tyre from a consumer point of view was clear; cheap raw materials, few regulations in Chinese factories and a favourable exchange rate meant budget tyres were often up to half the price of a mid-range alternative. With few consumers fully understanding the importance of their tyres, the cheapest option is often the default choice, especially when that’s what the garage is recommending.
Baldwin continues: “Drivers are interested in their safety, longevity and quality but have become fixated by the cheapest option and too many retailers have become conditioned to appeasing this demand. With the price barrier all but removed, selling the benefit of a better quality tyres should now be a much easier conversation for retailers to have and customer retention is always going to be higher from giving the driver better value and a recognised brand.”
Confusingly, the increasing cost of a budget tyre has led some budget brands to position themselves as mid-range. Alan Baldwin suggests the simplest way to distinguish mid-range from budget is: “If it hasn’t got OE; it’s budget. Any tyre manufacturer that doesn’t produce OE tyres for major car marques is not mid-range.”