LONDON—As with so many other European Union (EU) regulatory initiatives in the fields of health, safety and environment, the European tire-labeling scheme could end up doing more harm than good to manufacturers in the region.
Introduced in November 2012, tire labeling was devised by EU regulators as a means of raising the safety and environmental performance of tires by requiring them to display performance ratings for rolling resistance, wet braking and noise.
However, a lack of enforcement in many EU member states has meant that the scheme has, so far, proved ineffective, particularly with regard to addressing the flow of low-quality tires imported into Europe. And, as if to add insult to injury, it now seems that the EU labeling scheme is also giving a boost to importers of cheap tires into the region.
While labeling is raising the quality of tires on European roads, it also has helped sales of budget tires, according to Gerard Stapleton, head of South East Asian research at market research company LMC Automotive.
As well as being very price competitive, these products “are performing well in meeting the labeling characteristics,” said Mr. Stapleton, adding that this has “encouraged imports of budget tires into Europe.”
For similar tire-label ratings, he said, “low-cost tires are actually 15-percent cheaper than quality tires and 25-percent cheaper than premium tires. Comparing the figures from 2006 and 2015, we find that the quantity of imports has increased, and low-cost tires— which are below 30 euros ($33) per tire unit value—now form 65 percent of imports.”
More significantly, perhaps, China is now adopting the European tire-labeling system as a means of raising quality standards in its tire industry.
According to Mary Xu, secretary general of the Chinese Rubber Industry Association, China's tire label scheme will be based closely on the EU version and could be introduced on a voluntary basis this year, becoming compulsory by 2019.
Unlike in the EU, according to Ms. Xu, the Chinese scheme will have much more “teeth” when it comes to market supervision.
For example, she warned Chinese tire makers that “if you cannot put the right label on your tires, then we will announce that on TV and on websites, and your company will lose its (reputation).”
With enforcement likely to be much more effective in China, labeling could soon give tire makers in that country further competitive advantage over more heavily regulated tire makers in Europe—and not just at the lower end of the market.