The original equipment tires on your new vehicle are part of an intricate financial relationship between the tire and car companies, dealerships and consumers. You may not have given much thought to those four round black things when you bought your car. But, you will when it comes time to replace them. Therein lies the story.
Most car buyers replace the tires that came on their vehicle with identical ones.
The vast majority of car buyers, rather than shopping around, chose to replace the tires that came on their vehicle with the identical tires. Not only does the tire company benefit from the OE (Original Equipment) business, so to do the new car dealers. A large number of their customers come back for replacement or alternate season tires. That’s why you see so many tire ads from car dealers.
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It all starts during the development stage, several years before a new vehicle is unveiled. Once the designers, and engineers have completed the initial work, they send out an RFQ (Request For Proposal) for the tires to all major tire companies. The engineers know what he want in terms of ride quality, noise levels, rolling resistance, traction. Wear is not a priority because it is the tire company, not the car company that provides the warranty.
Different vehicle types need different tires
Obviously the company about to reveal a new high-end sports car wants a tire that will show off all their hard work on suspension and handling. Maximum grip is the top priority. Their customers do not have wear, and fuel mileage atop their wish list. On the other hand, manufacturers about to introduce a hybrid or electric vehicle, want a tire with extremely low rolling resistance. There is very little emphasis on grip. A luxury car manufacturer will require tires that offer a very smooth and quiet ride. Pickup makers are looking for tires that can accept heavy loads without overheating and good grip on a variety of surfaces.
The details of those RFPs are specific, with numerical goals in each area – ride, handling, wear, noise levels, rolling resistance, traction etc. Tire companies may have a suitable product in their portfolio, one that can be altered to suit or have to develop a new one. Often they can come up with a new compound or tread design for an existing tire to meet the requirements. Or, they may have been working on a breakthrough, and see this as an opportunity to gain awareness.
The numbers are huge
In all cases, the numbers are huge. Ford built and sold almost one million F150s in North America last year. That’s five million tires, including a spare! Toyota built, and sold more than 400,000 Camrys in North America last year. They needed two million tires!
Winning contracts to supply OE tires has both immediate, and long -term implications. For a known brand, it solidifies a reputation. For a new brand is may establish one. For tire dealers, it represents an opportunity to capture a slice of the replacement market.
This is a business decision in a very competitive situation. Obviously, to the car company, price is probably the decision maker, provided all bids meet the same specs. The tire company has to keep its price to a minimum to stay in the hunt, or perhaps provide the tires at a slight loss if trying to get the market or a certain segment of it.They know that consumers will come back for replacement units down the road.
Next time you take a test ride, check out the tires! You may see a familiar name, or one you have never heard of – but will become familiar.