To further embellish the point on tires, and for the entertainment of the forum, let us consider the sheer scale and magnitude of money that one of these big truck fleets is working with. All this stuff is about 5 year old information got from the horse’s mouth that people would be willing to pay big bucks to a market research consultant to get, by the way, so might be slightly different than current reality, so do not pick at me on details.
A large, well known truck fleet is operating in North America. They own 8000 tractors, with 10 tires each, and 25,000 trailers, with 8 tires each. This means that at a given moment, these guys own a total of 280,000 tires. The tractors travel, on average, 250,000 miles per year, and consume diesel fuel at a rate of on average, 6.6 mpg. The trailers mostly sit around. They do not consume fuel, in and of themselves, but when you move them, their tires start to wear out. Each trailer moves about 100,000 miles per year.
So, at $1.50 per gallon of diesel, this company’s fuel expense is just about $455 million, and a one cent increase in the cost of fuel hits this particular company in the tail end to the tune of $3 million.
It is fairly easy to reduce the rolling resistance of a tire by 10%, with normal technology, but much more difficult to do so without screwing up the treadwear. But assuming you can do so, this 10% reduction in rolling resistance leads to about a 2% increase in vehicle fuel economy. There is a fudge factor that compensates for the size and shape of the vehicle, etc. that is responsible for this difference.
So if this is the case, the 2% fuel economy improvement should give them about an extra $9 million. So, in theory, $9 million divided by 280,000 tires gives about $31 per tire that they should be willing to pay for the innovation that gives them the improved mileage.
But, they do not want to pay this much: For one thing, they do not get it all at once: they must wait and convert their fleet over as their existing tires wear out. Also, there is the problem that the trailers almost always get retreads, and certain positions on the drive axles get retreads, but the steering tires are new, so you have the whole issue of whether an “innovative retread” can be developed, since if you have a mix of innovative and regular tires, the advantage is diminished.
There are a lot of side issues: What if you are the tire manager, and make the decision to change your fleet to fuel efficient tires, and the fuel price drops temporarily, like it just did. You are the world’s biggest idiot, and are out of a job, is what.
The real problem is from the perspective of the tire company. You have a big, capital intense plant, that needs to run all the time. You have several equally big, equally desperate competitors, run by egomainacs who refuse to give way market share, and are willing to undercut you with their innovative tires, just so they can say they are the biggest, so the pie shrinks. You might have to pay your suppliers a little bit for the innovative technology, so you lose that piece of the pie. Plus you have imports coming in that are already $31 cheaper than yours, so as long as they wear as long as your current tires, and fuel efficiency is comparable, there is a point at which a truck fleet will be just as well off to do the cheaper tires and forget about the fuel.
Now, if the fuel were $5 per gallon, the value of the innovation becomes $103 per tire. With a pie that big, it becomes possible to make some changes in your entrenched technology to economize on fuel. That’s why in Europe, this kind of thing is a lot more realistic. The problem in Europe is the truck fleets tend to be a lot smaller and therefore less willing to understand and bother making the change.
If the tire guys really believed in Peak Oil, they would be going crazy with new product development, etc. in the anticipation of the $5 diesel cost, frantically trying to implement the innovations which have already existed at some time to take advantage. Guess what. Instead, they have laid off a lot of R and D types, and basically decided to focus new investment in Asia where the market growth is, and make cheaper tires. Go figure.
If and when, as the forum says, TSHTF, as Murphy’s Law of Uneven Distribution states, it will not be distributed equally. This big trucking company and these big tire companies are extremely vulnerable.