KEY TAKEAWAYS
  • In the future, smart cities will be home to driverless cars. Tires will have to change too.
  • At this early stage of development, it helps to frame the challenge with a series of questions around driving habits, newer production techniques and advanced materials.

To build the smart cities of tomorrow, we’ll need to see a vast revamp of all of the systems and technologies in place. Roads and neighborhoods will be reconfigured from the ground up, as people move through urban spaces on foot, bicycles and autonomous driverless cars.

While many new technologies will find a home in these self-driving cars, don’t forget their core mode of propulsion: tires.

And a peek into tech trends suggests that the basic material of tires—rubber—will also evolve. At this point, a range of options are in play. Barry Van Bergen, who directs the Oil & Gas strategy group at KPMG frames the choices with a series of questions: Will tires mechanically generate electricity as they spin to help charge vehicles? Will these tires be 3-D printed in labs? How will tire performance need to change to reflect the different ways that tomorrow’s cars are driven? “Once you have robotics take over the task of driving, you’ll have to optimize such things in a different way,” says Van Bergen.

He adds that these tire changes will impact all kinds of vehicles, from the biggest mining trucks to the smallest bicycles.

These moves are sure to upend the economics of tire-making. Today’s tires consume roughly $2,000 per ton in rubber to produce. The introduction of new technologies is bound to raise production costs—and selling prices per tire.

It’s not even clear if the tires of tomorrow will be made of rubber or some sort of advanced polymer. “We’d love to see a world with far less rubber in it,” says Van Bergen. “That would help meet one of the big goals of fixing the pollution problem.”

How the transportation industry absorbs such changes and costs is an open question.

Right now, tire making is moderately profitable. Goodyear Tire & Rubber, for example, posted gross margins of around 24% in 2017. Cooper Tire & Rubber, the only other publicly-traded tire maker in the U.S., generated 18% gross margins in 2017, according to the company.

The advent of high-technology tires represents both threat and opportunity for these firms. Goodyear, with its Eagle 360 Urban tire, and the Michelin Visionary tire concept point to the coming tech trends for advanced tires. Time will tell if auto makers and consumers embrace these high-tech solutions.

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