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Well tire deformation can me coded in without being visually seen. I understand what you're sayin based on how it looks but that doesn't mean it's coded into the experience.
I think he was probably referring to the tire and suspension physics model. They are very important and complex for accurate and realistic car handling.
Regarding flexing, probably the GT physics engine takes it into account, but it's not graphically shown, at least as of yet.
From what I've seen in GT5 videos and screenshots, I think the game partially simulates this through in an easy way by clipping part of the tires with the road surface. It's a rather rough hack, though.
By the way, I hope that dynamic tire pressure, in-mid-out wear and temperature, flat spots, are implemented. They are more important than visual flex.
Yes, it's quite possible that the physics model already deals with tyre deformation (as it should, since there's no way a "proper" tyre model doesn't look at where the contact patch is relative to the wheels / car!)
However, it does look a little bit odd when the tyre just clips through the ground. It's similar to how the tyres sink into gravel, etc. but that's a bit trickier to do (although, snow grooves are possible?!).
I'd much rather prefer a more in-depth model over the visual representation, too. For instance, tyre temps (inner / middle / outer) are a great way to tweak set-ups, alongside the "feel" and lap times, of course.
The fact (is it?) that Enthusia's physics guru is onboard with PD now could be promising all around; although, they said that when physics guru Eero Piitulainen (formerly of Warthog games, makers of Richard burns Rally) turned up working on NFS Shift...