Analysis of Business Feasibility for Introduction of Retread Tires in Passenger Cars

Abstract

The tire industry has employed effective CO2 reduction measures in the form of retread tires, which replace only those components that are exposed to the road’s surface. Due to safety concerns, lack of manufacturing technology, high cost, and other issues, retread tires in passenger cars are currently unavailable in Japan. This study aims to analyze the production cost and environmental impacts of retread tires in passenger cars in Japan. This study considered investments in and economies of scale of retread tires, which have lower profit margins than new tires after safety and manufacturing technology issues have been resolved; this is done when the carbon tax is equal to that in the EU. This reserach further examined the proportion of retread tires and new tires that are produced. The primary goal of this study is to determine which ratio of retread vs. new tire production is feasible for an optimal business portfolio. If a carbon tax equivalent to that in the EU was introduced in Japan and each company offered retread tires for passenger cars, this setup would not be profitable and overall costs would need to be lowered. To achieve this cost-effectiveness, it is necessary to extend the life of the equipment and to lower the initial investment. Furthermore, by calculating the costs involved using realistic production expenses, a more realistic cost for the introduction of retread tires for passenger cars can be achieved.