Why EVs are causing a tire boom

The business of tires has historically been marked by tight competition, low growth and slow margins.

The total market value has remained around $50 billion in the past few years, and the overall market grows at a rate of about 2% per year, according to consultancy AlixPartners.

But electric vehicles are presenting a whole new set of opportunities.

With their heavy weight and quick acceleration, EVs tend to burn through tires about 20% faster than internal combustion vehicles do, according to AlixPartners. And the tires cost about 50% more.  

Other technical challenges include dampening tire noise, which is a lot more noticeable in the cabin of an otherwise silent EV, and improving an EV's range. Michelin research shows tire selection can impact an EV's range by 10% to 15%.

The extent to which tire companies are able to distinguish themselves as innovators in these areas could determine whether, or how often, customers ask for their products by name. Currently only about half of buyers do, according to Northcoast Research estimates.

"If EV does kind of evolve and proliferate through the car population like some think, it may bring about what I call the gold rush for tire manufacturers," said John Healy, an analyst with Northcoast Research.

Watch the video to learn more.