Interview with Karel Kucera, Managing Director – Continental Middle East

You have been with Continental for almost 20 years. How has the company evolved over the years in terms of marketing strategy?

Everything is changing around us and we constantly need to adapt to these changes. From the company’s perspective, it is important to realise how customer behaviour and preferences have changed. These days, consumers have a far greater choice in the market place. Let’s take an example of how customers used to select and purchase their car tyres two decades ago. Despite the diversity of brands that existed, customers had little knowledge of the products and always tended to follow the recommendations of one or two sources such as the technician or an editor of a local auto magazine. This has now changed with customers being able to access thousands of reviews and comparisons at the touch of a button on their smartphone and take a conscious decision.

Looking more specifically at how Continental has also evolved over the years, be it through product offerings and marketing strategies, some of the company’s biggest developments can be summarised with the following:

• A global footprint – Continental’s production facilities and point of sale presence has evolved and increased – thanks to our international and local market partners whom we have strong relationships with. This has been evident through in the strong retail division that has developed.
• A holistic approach – With our expertise in both tyre and automotive parts production, Continental has become a key industry player in providing complex mobility solutions that meet the needs of our customers and increases their trust in us and our German engineering.
• Safety – Continental has been a pioneer in road safety for more than 140 years. Driver safety has been – and always will be – at the heart of our company ethos. Today, we take our unrivalled driver safety heritage to the next level, with our new commitment to customers: Vision Zero. In less than 10 years from the announcement of our safety vision, we are proud to be contributing significantly to the wellbeing of motorists and pedestrians and reaching our vision of zero fatalities, zero injuries and zero accidents.
• An ecological focus – Continental’s goal is to find an ecologically, economically and socially viable solution for the increasing demand for natural rubber. For this, Continental is heavily involved in building new research facilities to focus on industrialising the cultivation and processing dandelion as an alternative source of natural rubber. Our target is, within the next five to 10 years, to start offering Continental tyres made of dandelion.

 For Continental, which are the most important markets in the Middle East and why?

 The Middle East as a region as a whole is a key market for Continental. This is why we set up a dedicated regional office in Dubai in 2015, to ensure we could really get under the skin of the market and best service our customers.

Our three most important markets here are Saudi Arabia, the UAE and Egypt. Research indicates that Saudi Arabia is a 12-million market for passenger and light truck tyres, and close to three million for trucks. The UAE and Egypt are estimated to each represent a market of six-million passenger and light truck tyres market.

 Women have recently been allowed to drive in the Kingdom of Saudi Arabia. What impact do you think this will have on the way tyres are marketed in the Saudi market?

 We naturally see this as a big opportunity not only for Continental but for the automotive industry as a whole. More drivers will mean more cars on the roads and more tyres rolling. And so, combined with Saudi Arabia already being such a key market for Continental, we have inaugurated in May 2018 our first-ever national office in Jeddah to support the growing demand for our products and services in the kingdom.

In our new Jeddah office, we already have Saudi female staff, helping us to understand the Saudi women audience and providing valuable input as we look to reach out to them with relevant offers and programmes. We also plan to offer special incentives and training programmes to support our local distributors and customers in the Kingdom, in order to help them promote our products among Saudi women.

The UAE is a market in which tyres from many different brands are available at different price points and Continental tyres are at the pricier end of the spectrum. In what way is Continental making an effort to differentiate its tyres from those sold by other brands?

 As one of the largest premium tyre manufacturers in the world with more than 145 years of experience, we are committed to one goal: to bring safety to the streets without compromising driving comfort or pleasure. German engineering is also renowned worldwide for its quality and sophistication. End consumers and Point of Sales in the UAE recognise how important this German engineering is as a strong brand argument for Continental.

Our current product portfolio includes our best performing tyres in the Middle East – the new Generation 6 range. Further ensuring we can significantly differentiate our offering from that of other tyre manufacturers, we are the only brand that manufacture tyres specifically for the Middle East needs.

It should also be noted that in the UAE we market other brands within Continental including General Tire and Matador, which appeal to different audiences. The Matador brand caters to the light commercial vehicle segment with products designed for Middle East such as Maxilla AP.

Bringing more than 100 years of experience in the 4X4 segment, General Tire will see an upgrade this year with the regional introduction of new patterns from the Grabber range. Additionally, we launched this year new summer tires from General Tire – the Altimax One range, which delivers superior performance with a primary focus on the drivers’ safety.

 What are the key challenges you face from a marketing perspective in the Middle East market?

 The interesting thing about the Middle East region is its diversity in terms of demographics, landscapes and climates across the various markets. This obviously requires us to be flexible and adaptable in terms of product focus and marketing strategies. We see this as an opportunity rather than a challenge.

Equally, the Continental product range is itself extremely broad as we cater to the needs of a wide variety of clients. These clients range from private car owners to large fleets, from truck operators to port management companies. So, our marketing plans have to address all their varying requirements.

And with a number of different tyre brands in our portfolio, we also have to be careful how we differentiate these in our marketing plans. We have to communicate the benefits and particular USPs of these separate brands, while reassuring customers that they can expect the same high-quality products that they have come to expect over the decades from Continental.

Finally, as the second biggest supplier to the automotive industry globally, we have to communicate about the non-tyre products that have brought to the market and which can make such a positive difference to the lives of both our business and private customers. Other than ContiPressureCheck^TM which we introduced in the Middle East for commercial vehicle customers last year, we have launched this year a new digital tire monitoring platform for commercial vehicles, ContiConnect^TM. This efficient solution for remote tyre monitoring helps fleets to maximise efficiency and sends alerts if tyre pressure deviates from the defined value.

Are there any distinctive characteristics that make this market different from other key markets in the world like Europe and North America?

 The key differences are the weather and the infrastructure. For instance, and as you would imagine, the GCC is an important market for summer tyres. In addition, the Middle East’s infrastructure means that we have to look at marketing tyres that are robust enough to cope with the road conditions found across the region.

That is why we introduced our best-performing Generation 6 tyre range, which was developed specifically with the Middle East market in mind. It is designed for small to high performance cars, and combines advanced German technology with local expertise to deliver unmatched levels of comfort and robustness suitable for the driving conditions faced by the region’s drivers.

Another key point is that in markets such as the UAE, which have an unusually high proportion of high-net-worth individuals, there is a particular interest in products catering to owners of ultra-high performance (UHP) and 4×4 vehicles.

When it comes to commercial vehicle tyres, Saudi Arabia is our major market; it is thought to be close to three-million marker for truck tyres which is as big as Europe as a whole. Our commercial vehicle and truck product portfolio is extremely broad and competitive, and we are fortunate to have great relationships with our partners and importers in the local markets that ensures we can offer a strong all-round service.

 You are responsible for the development of region-specific products. Standards with regard to tyre quality and manufacturing dates have become increasingly stringent in the UAE. How is Continental tackling this challenge? Do you think making tyres that conform to Gulf specification norms like GSO and SASO will help?

 With over 100 years expertise in the automotive and tyre industry, Continental is one of the leading original equipment (OE) providers in the European market; almost every third car leaves the factory with tyres from Continental. Car manufacturers only use premium tyres that conform to the highest quality standards. Continental tyres meet all of these standards, from maximum speed to wet and dry braking, handling, comfort and noise level as well as mileage.

So, we already meet the highest standards when it comes to quality and manufacturing dates, whether it be for the Middle East or anywhere else around the world. Our products already meet all relevant GCC specifications and regulations including the ones set by GCC Standardization Organization (GSO). Such standards are important as they further help protect the consumer, environment and the public health as well as develop the production and service sectors, foster the intra-GCC trade.

 In this market, the replacement market is more important than the OE market. How would the price be different from OE and why would customers choose this over OE?

As a premium automotive brand, we take pride in offering the same high-quality standards across our product portfolio for both OE and replacement tyre markets, which have one price tag per size Our main concern and our priority focus is to deliver the highest levels of safety across all our products. We believe that customers recognise the importance of opting for high quality and safe tyres, and that this is a major reason for discerning buyers to choose Continental.

Another reason for buying Continental is that we offer a product range that has been developed specifically for the Middle East region; a robust tyre that is customized to the extreme climate conditions found across much of the region, something that even OE tyres can’t lay claim to.

 What are the key concerns today in the Middle East tyre market regarding the slump in sales of tyres and how do you plan to address them?

 Car manufacturers might be experiencing challenges, on both global and local levels, however this isn’t particularly reflected in our own experience as a tyre manufacturer.

In the second half of 2018, we saw growth in our sales, specifically in the Middle East.  Moreover, Continental achieved its global targets for the previous fiscal year. Despite declining automotive markets, we have continued to grow profitably. Our global annual sales rose to around €44.4 billion in 2018, representing organic growth of about 3 percent.

We continue to be positive about the opportunities presented by the Middle East tyre market, and the introduction of the Generation 6 range was designed partly to ensure we are in a strong position to overcome any market challenges when they do occur.

 Can you mention some of the significant innovations Continental has introduced in tyre design and development?

 Continental has been a pioneer in road safety for more than 140 years. Our innovative product offerings serve our safety vision and this is evident in two recently announced tyre concepts that ensure ultimate safety and comfort for drivers: ContiSense and ContiAdapt.

 ContiSense is a rubber-based sensor in the tyre that sends feedback to a receiver in the car to notify the driver of the tyre’s temperature, pressure and tread depth.  ContiAdapt is a system that allows automatic modification to the tyre contact patch according to the different road conditions, which is crucial to both the safety and the ease of driving.

Other solutions include innovative tyre technologies that are available in the region – Continental SSR (Self Supporting Runflat) and ContiSeal tyres.  Where the former is a runflat technology developed especially for low section tyres, which keeps the tyre compatible with all standard rims, the latter is a technology designed to seal a damaged tyre from inside.

ContiSilent^TM is another innovative we pride to have at Continental. It is a tyre noise-reducing technology designed to reduce interior noise on all road surfaces. ContiSilent™ tyres are equipped with an inner tyre absorber, a polyurethane foam, attached to the inner surface of the tread area with an adhesive. Regardless of the temperature, the structure of the foam stays intact.

As one of the leading automotive solution providers in the world innovated the company’s division Continental Automotive Systems (CAS). Founded more than 100 years ago, CAS s a brake and electronics supplier to the automotive industry, supplying systems, components, electronics, lithium-ion batteries and engineering services for vehicle safety, comfort and powertrain performance. CAS consists of more than 44 plants, research centres and test tracks in over 15 countries. Average daily production includes over 45,000 electronic brake systems, 136,000 brake callipers, 163,000 wheel speed sensors, 27,000 airbag components and 72,000 body electronic modules.

 The climate and terrain in the Middle East can vary from one extreme to the other. What would you advise customers here to look for when choosing tyres for their vehicle? What are the precautions they need to take?

 The Middle East is an all-season and summer tyre market in general with the exception of some of the Levant countries.

For hot climate zones, we would advise the customers to opt for Continental’s Generation 6 range of robust tyres which have been specifically designed to cope with the road conditions found across the region and delivering an unparalleled level of comfort.

Regarding precautions, it is essential that buyers get the right tyre size for their car and ensure that the date of production of the tyre is still valid as an old tyre can be extremely unsafe. They should also purchase a high-quality tyre, and be confident that the retail outlet they are buying the tyre from is professional, knowledgeable and stores the tyres is appropriate conditions that prevent deterioration of the tyres over time.

 What do you think is the outlook for the tyre industry in the Middle East in the short term and the long term?

 Globally, we are expecting a positive market outlook and have an aim of consolidated sales of about €45 to €47 billion at constant exchange rates, and an adjusted EBIT margin of about 8 to 9 percent.

We have a similar positive outlook for the region based on several factors. These include the recent changes in Saudi Arabia where the increasing number of women drivers is expected to lead to a higher demand for cars and tyres. Also, the rise in the awareness of CO2 emissions and recent imposed regulations generates a higher demand for a better-quality tyre.

Other key drivers behind our own positive outlook for the Middle East are the technological advancements, expansion of the distribution and retailer networks, and increasing safety awareness. On this point, it is important to mention our Vision Zero safety campaign that is currently being rolled out her and around the world. As a leading global safety expert in the automotive industry, Continental has set an ambitious goal to be achieved in three successive stages: zero fatalities, zero injuries and zero accidents.