Tyres: consumer and retailer views

Research methodology

Consumer awareness, attitudes and behaviours:

─ Four focus groups (two in Auckland and two in Wellington) with recent tyre purchasers, May 2013. Two groups were with low-to-middle income and two were with high-income participants, and were a mix of ages and gender.

─ Four questions were asked in the Consumer Omnibus to get an indication of the size and value of the New Zealand tyre market. The sample was nationally representative. The survey was conducted in May 2013, there were 1,037 respondents.

─ A consumer online survey with 300 recent tyre purchasers using the Research Now panel was conducted in June 2013. The consumer online survey was weighted back to the Consumer Omnibus data for tyre purchasers and has a margin of error of 5.7%.

Retailer attitudes and behaviour:

─ 100 computer-aided telephone interviewing (CATI) with tyre retailers sourced through the Yellow Pages, in May and June 2013.

2

Consumer market overview

3

Almost 1 in 2 New Zealand adults have bought tyres in the past year for themselves or someone else

Base: Total May 2013 poll sample (n=1,037)

T1. Which of the following best describes you?

47%

53%

I have not bought tyres in

the past 12 months

I have bought tyres in the past

12 months

4

Sales in 2012: for comparison… LV tyres: ~ 3 million Light bulbs: ~ 11 million

For the majority of people (70%) it’s a ‘distress’ purchase

5

Q17. Which of the following prompted you to purchase your tyres? 58%

35%

27% 25%

16%

6% 4% 1% 1% 0%

20%

40%

60%

80%

100%

Recommendedby / failed WOF

Recommendedas part of the

WOF test

Failed the WOFtest

I felt I neededto replace them

It wasrecommended

at service /repairs

I just decided Iwanted to

replace them

Puncture /blow out /damaged

Replace onregular basis

Others

30%

70%

Active Buyers - replaced their tyres without beingrecommended or instructed to (n=90)

Passive Buyers - replaced their tyres because theywere recommended to or they failed WOF (n=210)

Base: All respondents (n=300)

Almost half of consumers don’t remember which brand of tyre they bought

6 Base: May 2013 poll sample, tyre buyers (n=494)

12%

11%

4%

4%

3%

3%

3%

14%

46%

Bridgestone

Firestone

Dunlop

Goodyear

Kumho

Hankook

GT Radial

Other brand*

Don’t know

T3. And what brand did you purchase?

Brand purchased

1%

18%

29%

16% 13% 14% 8%

0%

10%

20%

30%

Up to $50 $51 to $100 $101 to $150 $151 to $200 $201 to $250 $250 or more Don’t know

T4. And finally approximately how much did each tyre cost you?

Those buying more expensive tyres ($250+) are significantly more likely to know which

brand they bought (68% vs. 54%)

Cost

Irrespective of buyer type, consumers claim a high level of information gathering prior to purchase – although the sources for information differ

7

40%

22% 25%

12% 18%

7% 7% 7% 6% 2% 1% 9%

27%

38% 25% 16% 13% 12% 5% 4% 4% 2% 1% 0% 3% 30%

37% 26%

12% 13% 10% 4% 3% 3% 0% 1% 0% 1%

31%

0%

20%

40%

60%

80%

100%Active buyers (n=90) Total (n=300) Passive buyers (n=210)

Q18. Prior to buying those tyres, did you seek any information from the following sources?

30%

70%

I didn’t seek any information (n=90)

I sought outinformation (n=210)

Base: All respondents and by sub-group as indicated

Consumer considerations with

tyre choice

8

4%

5%

6%

9%

18%

4%

3%

5%

6%

13%

13%

16%

28%

11%

11%

13%

13%

21%

27%

34%

34%

41%

41%

34%

61%

51%

53%

42%

55%

53%

44%

37%

31%

27%

15%

26%

36%

30%

41%

19%

13%

12%

11%

8%

7%

6%

0% 20% 40% 60% 80% 100%

Durability of the tyre

Safety factors

Road handling

The price

Fuel efficiency

Recommendation by a mechanic or retailer

Type of tyre, e.g. performance, directional

Noise reduction

Have used the tyre before

The brand

The look of the tyres

1 Extremely unimportant 2 Unimportant 3 Neither unimportant nor important 4 Important 5 Extremely important

Durability, safety, road handling and price are the tier-one factors that people consider when buying a tyre – fuel efficiency is a second-tier consideration

9

Q22. If you were buying tyres for your vehicle tomorrow, how important would each of the following factors be to you when deciding which tyres to buy?

Total important

Mean

87% 4.1

86% 4.2

83% 4.1

82% 4.2

74% 3.9

66% 3.7

56% 3.5

48% 3.4

40% 3.2

34% 3.1

21% 2.6

Base: All respondents (n=300)

This is low relative to retailers’

perceptions (87%)

3.1

4.5

4.9

6.1

6.5

12.0

12.7

11.7

14.4

18.7

23.6

3.7

5.3

5.4

6.2

6.5

11.8

11.8

12.2

14.0

18.5

23.4

5.2

7.0

6.6

6.4

6.6

11.4

9.6

13.3

13.2

17.9

22.8

The look of the tyres

The brand

Have used the tyre before

Noise reduction

Type of tyre, e.g. performance, directional

Fuel efficiency

A mechanic, retailer or other expert’s recommendation

Durability of the tyre

Road handling

Safety factors

The price

Below shows the average number of points given per item

Active buyers (n=90)

Total (n=300)

Passive buyers (n=210)

Comparatively, price is the most important factor, followed by safety and road handling; fuel efficiency has only half the weight of price

10

Q22b. Please allocate a total of 100 points across the list below in terms of what you think are the most important factors to you.

Base: All respondents (n=300)

But a brand may be associated with other higher ranked factors such as safety, road handling

Consumers and low-rolling resistance tyres

(fuel-efficient tyres)

11

12

Yes, 35%

No, 65%

Q23. Have you heard about, or know of, fuel-efficient tyres (sometimes called low-rolling resistance tyres)?

Yes, 27%

No, 73%

Yes, 24%

No, 76%

Active buyers (n=90) Total (n=300) Passive buyers (n=210)

With only around a quarter of people being aware of fuel-efficient tyres (FETs), there is some work needed to improve awareness

Base: All respondents and by sub-group as indicated

26% 21% 17%

10% 16% 20%

52% 46% 42%

12% 17% 21%

0%

20%

40%

60%

80%

100%

Active buyers (n=31) Total (n=82) Passive buyers (n=51)

Can't remember

Not offered

Offered, not bought

Offered and bought

Prompting of FETs by tyre resellers is low, but where this did occur, active buyers had a higher conversion than passive buyers

13

Q25. Thinking back to the last time you bought tyres, did the tyre specialist / retailer discuss or offer fuel-efficient tyres as an option?

Of those offered FET, 72% were converted to purchase

Of those offered FET, 46% were converted to purchase

5%

6%

9%

4%

24%

22%

25%

53%

49%

55%

15%

15%

15%

0% 20% 40% 60% 80% 100%

Total (n=300)

Active buyers (n=90)

Passive buyers (n=210)

Extremely unlikely to consider Unlikely to consider

Neither unlikely nor likely to consider Likely to consider

Extremely likely to consider

After being presented with the FET concept, people reported high levels of purchase consideration, particularly passive buyers

14

Q28. … Thinking about the description below, how likely are you to consider buying fuel-efficient tyres the next time you need tyres?

Would consider

Mean

68% 3.7

64% 3.6

70% 3.8

New fuel-efficient tyres use modern design, construction and materials to improve fuel efficiency by minimising the amount of energy needed to push tyre the along the road, without compromising safety and performance.

Using fuel-efficient tyres can improve your vehicle’s fuel efficiency by 3% on average. Over a year this would equate to around $70 worth of savings for a typical New Zealand motorist, or around $200 over the life of the tyres.

Base: All respondents and by sub-group as indicated

44%

10% 7%

0% 3%

12%

0% 3% 3%

0%

6% 3% 3% 3%

13%

49%

9% 7% 6% 5% 5% 4% 4% 3% 3% 3% 2% 1%

7% 10%

52%

9% 7%

9% 6%

1%

7% 5%

3% 5%

1% 2% 0%

10% 8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100% Active buyers (n=32) Total (n=95) Passive buyers (n=63)

For those who rejected the concept, the potential price of FETs was the main concern

15

Q29. What stops you from considering fuel-efficient tyres?

“I'm guessing they are quite a bit more expensive than regular tyres and so

cancelling out any savings.”

Base: All respondents and by sub-group as indicated

“Age of car and small distances I

now travel.”

“They most probably won't suit my type of car, they will be aimed at 4 cylinder family

cars not performance cars.”

Price is the biggest single piece of information that people would like to know more about

16

28%

18%

10% 10%

0%

8% 8% 6% 6% 5%

0% 0% 2%

22%

31%

15% 11%

9% 8% 6% 5% 4% 3% 3% 3% 3% 3%

22%

33%

14% 12%

8% 11%

6% 3% 4% 3% 3% 4% 4% 3%

23%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Active buyers (n=38) Total (n=148) Passive buyers (n=110)

Q31. What additional information, if any, would you like about fuel-efficient tyres?

“Information to show how they compare with normal everyday

tyres.”

“Does the fuel efficiency influence safety and road holding, and by how much?”

“The saving from the efficiency has to be compared to the initial cost.”

“Type, price, suitable to which cars, brands, where to [buy] cheaper from, etc.”

“Would need safe tyres.”

Base: All respondents and by sub-group as indicated

17

People may assume that just because you can buy them, they are all equally good…

2011 AutoBild - 50 Sommerreifen im Test 205-55-R16

3%

6%

6%

6%

7%

7%

7%

16%

20%

18%

23%

33%

29%

23%

28%

38%

37%

39%

28%

4%

4%

8%

8%

0% 20% 40% 60% 80% 100%

Efficiency and safety labellingon tyres similar to the energy

rating label

Information on minimumstandards for safety and

efficiency of tyres

An online comparison tool

Information from anindependent organisation or

government agency

Not useful at all Not useful Neither useful nor useful

Useful Extremely useful Don't know

What support is there for better information…

18

Q16. Thinking about what you would find useful when next buying tyres, please rate the following on how useful you think each one would be.

Total useful

Mean

71% 4.0

66% 3.9

62% 3.9

56% 3.7

Base: All respondents (n=300)

Consumer tyre care and maintenance

19

20

Which one is underinflated by 30%?

Only 4 out of 10 check their tyres once a month, with the primary site of pressure checking being the petrol station

21

38%

37%

13%

6% 6%

In the past month

1 to 3 months ago

4 to 6 months ago

More than 6 months ago

Never

Q13. When was the last time you checked your tyre pressure?

79%

9%

9% 3%

Petrol station Home Tyre retailer Other

Q14. Where do you normally check your tyre pressure?

Base: Q13 - all respondents (n=300); Q14 - respondents who have checked their tyre pressure (n=281)

Men tend to

“forget”

“can’t be bothered”

Women tend to

“not to know what they pressure should be”

“not know how to check pressure”

“leave it to their partner”

AA survey from 2011 looked at the reasons why some people don’t check their tyre pressure

22

Male 25-44 Female 25-44

Male 45-64 Female 45-64

Over half of people don’t know their tyre pressure and some people do not know how to check and adjust their tyre pressure

23

Q10. Do you know what your tyre pressure should be?

43% 57%

No

Yes

Base: All respondents (n=300)

20%

80%

No

Yes

Q11. And do you know how to check and adjust tyre pressure for your tyres?

Base: All respondents (n=300)

72% of males knew their tyre pressure, compared to 44% of women

Retailers

24

Who are the retailers we surveyed?

59%

35%

5% 0% 1% 0%

20%

40%

60%

80%

100%

Independentlyowned

Part of a franchise Corporate /company

ownership

Company owned Others

49%

20% 11% 6% 6% 3% 3% 3%

0%

20%

40%

60%

80%

100%

Bridgestone(all)

Beaurepaires Firestone Carters Tyres Other DiscountTyres

GoodyearAuto Service

Centre

Mag & Turbo

Q2. Is your business ...

Q2b. Which franchise is your business part of?

Base: Franchise retailers (n=35)

Base: Total retailers (n=100)

*NB: Tony’s Tyre Centre has a company policy of not participating in surveys 25

16% 31%

43%

3%

8%

Independent retailer

WOF / servicing / mechanic

Franchise / corporate retailer

Other

Don’t know

Where do consumer buy tyres

Retailer survey did not capture this part of the market

Mid-range and budget tyres make up most of the market

34%

36%

34%

43%

30%

42%

43%

41%

37%

46%

19%

18%

21%

17%

21%

5%

3%

5%

4%

4%

Total (n=100)

Independents (n=59)

Franchises (n=35)

Personal (n=34)

Personal & business(n=57)

Budget range Mid-range Performance range Other types

Q8. Thinking about your customers, does your business service mostly personal vehicles, business fleets or both equally?

Q7. And approximately what proportion of your light vehicle tyre sales volume, out of 100%, do each of the following categories make up?

By customer type

By retailer type

*NB: small base size (n<30) Base: Total retailers (n=100) 26

2%

4%

3%

4%

6%

15%

26%

3%

3%

5%

3%

6%

7%

13%

11%

11%

13%

14%

23%

28%

12%

17%

21%

19%

29%

25%

26%

32%

41%

38%

38%

41%

36%

35%

51%

33%

23%

30%

43%

42%

40%

31%

36%

33%

36%

30%

16%

3%

36%

46%

53%

45%

24%

25%

26%

20%

12%

15%

9%

9%

10%

8%

0% 20% 40% 60% 80% 100%

Retailer recommendation

Price

Safety

Suitability for vehicle

Durability

Deals / special offers

Road handling

Noise

Have used the tyre before

Type of tyre

Brand

Personal recommendation

Fuel efficiency

Look of tyres

Extremely unimportant Unimportant Neither unimportant nor important Important Extremely important

Retailers don’t think consumers value fuel efficiency…

27

Q9. Now thinking about what is important to your customers when buying tyres. Please could you rate each of the following factors?

Total important

87%

79%

76%

75%

67%

67%

66%

51%

48%

48%

45%

39%

26%

11%

Base: Total retailers (n=100) Low relative to consumers’ priorities 74% important

Retailers and low-rolling resistance tyres

28

Many franchises are currently stocking LRR tyres

11%

24%

63%

2% Not aware of them

Aware and plan to sell in future

Aware and don’t intend to sell in future

Currently stocking

80% - franchises & 51% - independents

14% - franchises & 31% - independents

6% - franchises & 15% - independents

Q11. …Which of the following best describes your business’ awareness of these new types of [fuel-efficient] tyres?

Base: Total retailers (n=100), independent retailers (n=59), franchisee retailers (n=35) 29

16%

16%

13%

11%

11%

10%

10%

8%

8%

6%

5%

5%

5%

5%

3%

Customer demand / request

Had to / told to / company policy

Research / results / personalexperience

Natural progression / way market hasgone

Dealer / franchise and part of productrange

Benefits - fuel saving, wear and tear

Quality / good tyre

Enviromental impact / eco-friendly

Brand brought out new tyres

Our company makes them

Availability / supply

Good selling point / easy to sell

Something new to try

Best for the customer

Cost / price

There are a number of reasons for selling LRRTs, with franchises being most strongly influenced by company policy

Q15. And what made you decide to start selling fuel-efficient tyres? (Base: Retailers who sell fuel-efficient tyres)

20%

0%

13%

13%

13%

7%

10%

3%

10%

0%

7%

0%

7%

3%

3%

14%

29%

11%

11%

11%

14%

11%

11%

7%

7%

0%

11%

4%

7%

4%

Base: Retailers who sell fuel-efficient tyres

*NB: small base size (n<30)

Franchises (n=28*) Total (n=63) Independents (n=30)

30

63% of all tyre

retailers sell LRRTs

51% of independents

sell LRRTs

80% of franchises sell LRRTs

Retailers claim consumer demand is a key motivator to start stocking LRR tyres

65%

38%

38%

35%

30%

27%

22%

19%

5%

5%

3%

Customers start asking for themregularly

There is stronger proof ofbenefits than currently available

One of your suppliers offers anincentive to start selling them

There is industry wide supportfor them

They add something new ordifferent to your product range

Regulatory influence such asminimum standards or labelling

They provide better profitmargins than conventional tyres

A local competitor starts sellingthem

Not convinced to sell them

Others

Don’t know

Q16. Which of the following would prompt your business to start selling fuel-efficient tyres?

Base: Retailers who currently don’t sell fuel-efficient tyres

Total (n=37)

31

37% of all tyre retailers don’t currently sell

LRRTs

18

5

5

2

2

4

There is no demand fromcustomers for them

We are not sure what thebenefits of choosing these

tyres are

They have a lower profitmargin

We have safety concernsabout these tyres

Cost / price

Others

Total (n=24*)

*NB: small base size (n<30), reported in raw numbers

24% of all tyre

retailers don’t plan

to sell LRRTs

Q12. For which of the following reasons, if any, are you not planning to stock fuel-efficient tyres in the near future?

Further information is needed to drive demand for LRR tyres

Q17. And now thinking fuel-efficient tyres in general, please tell me to what extent you agree or disagree with each of the following statements?

Agree

76%

75%

77%

…People need further education and information to start asking for or buying fuel-efficient tyres

3%

3%

3%

6%

7%

3%

15%

15%

17%

39%

37%

43%

37%

37%

34%

0% 20% 40% 60% 80% 100%

Total (n=100)

Independents (n=59)

Franchises (n=35)

Completely disagree Disagree Neither agree nor disagree Agree Completely agree

Base: Total retailers (n=100)

So what’s the market share of fuel efficient tyres?

33

27% of consumers have heard about

LRR tyres

37% of those consumers have

been offered LRR at their last purchase

57% of those consumers who were

offered LRR also bought LRR

Indicative sales market share for light

vehicle LRR tyres = 6%

Context: about 47% of tyre outlets (franchise,

independents, other) already stock LRR

% in blue boxes based on tyre research findings

2.85 million light vehicle tyres

sold/imported per year

LRR 170,000