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Overview of Ecos Consulting’s Presentation. Provide market context Identify the scale and type of market opportunity presented by the state fleet Discuss test procedure recommendations Report findings from rolling resistance data collected so far Identify remaining data needs

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Overview of Ecos Consulting’s Presentation

  • Provide market context

  • Identify the scale and type of market opportunity presented by the state fleet

  • Discuss test procedure recommendations

  • Report findings from rolling resistance data collected so far

  • Identify remaining data needs

  • Gather input from manufacturers and other stakeholders

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Ecos Consulting was hired by CEC to conduct outreach to manufacturers, obtain rolling resistance data, & make technical and program design recommendations.

Ecos specializes in the process of transforming markets for energy efficient products:

1. Research to identify the technological & market opportunities

2. Establishing manufacturer and retailer relationships and links to “public purpose” objectives

3. Understanding marketing leverage points for an efficiency message.

4. Creating a standardized test procedure and efficiency benchmark to facilitate fair, open competition.

5. Implementing a program (incentives, education, training, etc.) with trade allies to accelerate sales of the efficient products.

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SB 1170 Overview

  • Passed by Legislature in September 2001 and signed by Governor shortly thereafter

  • Key provisions:

  • Fuel-efficiency specifications by 1/31/03 governing motor vehicles and tires

  • Reduce petroleum consumption “to the maximum extent practicable and cost-effective.”

  • Goal is to reduce energy consumption of the state vehicle fleet by at least 10% by 1/1/05 (state buys about 1,500 vehicles and 5,000 replacement tires per year).

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Key Market Stats

  • Total North American tire sales: $24 billion per year

  • 60+ million OEM and 200+ million replacement tires sold per year (CA market alone 20+ million units per year)

  • At least 28 brands and 700 models of replacement tires for sale

  • Many complex partnerships among manufacturers and brands

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Top Four Manufacturing Partnerships (Michelin/BFGoodrich/Uniroyal, Goodyear/Dunlop, Bridgestone/Firestone, Cooper) Hold ~ 56% Share of Replacement Tire Market

Source: tirebusiness.com

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Rolling Resistance Is a Factor in the Competitive Marketplace

  • Michelin/BFGoodrich/Uniroyal played a leading role in the development of a new rolling resistance test procedure, has won 81% of JD Power’s tire customer satisfaction awards, and invests the greatest percentage of its revenues in tire R&D.

  • Goodyear has developed GT3 bioTRED models with very low rolling resistance and corn starch-based polymers.

  • Branded LRR tires for electric and hybrid vehicles, such as Bridgestone/Firestone’s ECOPIA.

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Replacement Tire Characteristics Marketplace

  • Market dominated by all-season radials (90+%)

  • About 80% of tires now carry speed ratings

  • Federal government mandates ratings for traction, treadwear, temperature resistance, size, max pressure, max load, and other attributes

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OE / Replacement Tire Differences Marketplace

  • Original Equipment Tires

    • Low rolling resistance sought for CAFE

    • Short lifetimes (~2 years) typical – (new cars driven heavily; tire warranty separate from car’s)

    • About 42% of buyers will replace OE tires at end of life with the same brand

  • Replacement Tires

    • Low cost and longevity more important in marketing than low rolling resistance

    • Lifetimes longer than 2 years

    • About 35% of buyers will replace their second set of tires at end of life with the same brand

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The Market Opportunity: Bringing Low Rolling Resistance to the Replacement Market

  • Ongoing improvements continue from changes in tire chemistry and design. The most efficient tires cut RR by 30% or more, saving 2-6% of fuel use.

  • Market opportunity to increase sales volumes of OE tires in the replacement market, rather than limiting low RR tires to the OE market only

  • May be able to increase brand loyalty & repeat purchases if customers can readily buy the same replacement tires that were on their new car

  • Customers already pay more for better performance, durability, and brand. With the right marketing, customers would invest in fuel efficiency as well.

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The Retail Side the Replacement Market

  • About 50% of all replacement tires are sold through local dealers and another 25% through regional and national dealers. Bridgestone/Firestone is largest national retailer.

  • General merchandise sellers like Wal-Mart, Sam’s Club, Costco are only about 11-18% market share, but are expanding.

  • Internet sites like tirerack.com also growing in importance – allow extensive comparative research across brands and models before purchasing.

  • Minimal marketing of rolling resistance at present.

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From an Energy Consumption Standpoint, Tire Use Dwarfs Manufacturing, Shipping and Recycling

Source: Pirelli

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The California Fleet Market Opportunity Manufacturing, Shipping and Recycling

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U.S. Market Share Estimates for Replacement Tires by Size Manufacturing, Shipping and Recycling

Source: tirebusiness.com

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Rolling Resistance Test Procedure Options Manufacturing, Shipping and Recycling

  • SAE J1269

    • Originally developed in 1979

    • Only tests at one speed (80 kph)

  • SAE J2452

    • Developed in 1999

    • Tests at 6 speeds between 115 kph and 15 kph

    • Used by GM, Ford, and Daimler/Chrysler for OEM tires

    • Used by NREL in ADVISOR modeling to estimate fuel economy impacts

  • Other Approaches

    • Coast down measurements by EPA on a test track (SAE J2263)

    • Track testing of fuel consumption in pairs of identical vehicles with different tires

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After extensive research, Ecos recommended the use of J2452 to the CEC

  • Results more predictive of real-world performance than J1269

  • Actions by the state would be consistent with testing processes already in use between automakers and OE tire manufacturers

  • Coast-down and test-track measurements can be substantially more expensive and difficult, not yet widely in use in industry

  • Linkage to NREL’s ADVISOR permits straightforward fuel economy impact assessments

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Variations Identified in the J2452 Testing Process: May Need Adjustments

Options to True-Up Tire Test Results from Different Manufacturers:

  • Centralized Testing

  • Trust but Verify

  • Trust and Adjust

  • Take the Tire Challenge

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Centralized Testing Need Adjustments

Main elements:

  • Competitively selected independent testing lab

  • Manufacturers submit tires for testing

  • Reports sent to CEC

  • Testing costs to be paid by manufacturers who wish to sell in California

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Trust But Verify Need Adjustments

Main elements:

  • Manufacturers provide CEC with self-tested tire data

  • CEC selects random models for testing

  • Independent results replace manufacturer results if they are less favorable

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Trust and Adjust Need Adjustments

Main elements:

  • CEC assumes car mfr function of adjusting data submitted by tiremakers

  • Sends tire samples to each tire mfr to test

  • Analyzes submitted results

  • Creates adjustment factors

  • Standardize rolling resistance data before publication

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Tire Challenge Need Adjustments

Main elements

  • Manufacturers submit data to CEC

  • Any result can be formally challenged by another manufacturer

  • Sample tested at CEC-selected independent test lab

  • If results come equal or better, test paid for by challenger

  • If results come out worse, test paid for the manufacturer that was challenged

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Relational Tire Database Need Adjustments

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How Will the Database be Used? Need Adjustments

  • Allows investigation of correlations between rolling resistance and other tire performance metrics (traction, tread wear, temperature resistance, etc.)

  • Helps fleet buyers determine which efficient tires are available for which vehicle types

  • Possible front-end for consumer education website (vehicle/tire matching)

  • Assists with cost effectiveness calculations – comparing incremental cost of efficient tires to lifetime fuel savings

  • Allows comparison of test lab results, possible adjustments as needed

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Remaining Data Needs Need Adjustments

  • Only have 9 data points for J2452 and 15 data points for J1269 – Need far more tire data

  • OE and replacement tires needed

  • Industry research on synergies and interactions between RR and other tire attributes

  • Information about industry marketing of low RR replacement tires so far

  • Incremental costs

  • Opportunities for listing in Green Seal Choose Green report