Insights into the US Tire Market Trends and Forecasts
The US tire market experienced significant growth in 2018, with an increase in total shipments and sales across various categories. Passenger replacement tires dominated total sales, while medium/heavy truck replacement tires showed the highest increase. Dealers' optimism improved in 2019, driven by a better finish to 2018 and expectations of moderate market growth. Factors such as tariffs, increasing raw material costs, and consumer behavior in response to price hikes are also shaping the industry landscape. Independent dealers continue to thrive, outperforming company-owned stores and gaining market share.
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Presentation Transcript
More Tread on the Roads During 2018 2018 was a much better year for the US tire market, with total shipments of all types of replacement tires (passenger, light truck and medium/heavy truck) increasing 3.1% to 266.4 million units, compared to a just a 1.3% increase for 2017, or 258.3 million units. Total replacement tire sales increased 5.3%, from $39.8 million for 2017 to $41.9 million for 2018. Passenger replacement tires accounted for 63.4% of the total sales, or $26.6 million, but medium/heavy truck replacement tires increased the most, or 10.3%. Original equipment (OE) passenger tires recorded a small increase from 46.0 million to 47.0 million while light-truck OE shipments decreased 3.7% to 5.2 million, but medium/heavy duty OE tire shipments increased 8.9%, to 6.1 million.
Dealers Optimism Improved as 2019 Sales Improved According to a tire industry analyst, 2018 didn t start very well for dealers; however, an early winter was a primary motivator for many consumers, which resulted in a better finish to the year. Selected dealers at the Tire Industry Association s TIA OTR Tire Conference during early 2019 all expected the US replacement OTR market to increase moderately, or approximately +3%, and many expected strong demand from the industrial sector. According to Modern Tire Dealer s monthly dealer surveys, Q2 2019 was much better than Q1 2019, although units sold at retail increased only moderately; however, a third of all dealers contacted said their June 2019 sales improved YOY from June 2018.
Tariffs and Increasing Raw Materials Costs Puncture Brands and Consumers Raw material costs continue to increase +1.7% during Q2 2019 vs. Q2 2018 and analysis from Modern Tire Dealer indicates consumers were shocked during spring 2019 at the retail price increases, which resulted in them choosing lower-priced tires. Tariffs have definitely affected consumer tire imports from China, as they decreased 14.1% from 2017 to 2018. Since 2014, Chinese imports have decreased 83%, from 60.5 million units to 10.3 million units during 2018. If additional tariffs are implemented, then US manufacturers may benefit, especially with the sale of higher quality domestic brands whose prices will be attractive compared to the expected increase in imported products.
Independents Continue to Roll Forward Based on Modern Tire Dealer analysis, independent dealers are still beating the tire- company-owned stores and other conglomerates with larger average annual sales per store, profits and customer retention, but only the best of independents will survive. Independent dealers continued to increase their share of the US retail consumer market, adding 1 percentage point from 2017 s 61.5% to 2018 s 62.5% while mass merchandisers and warehouse clubs decreased to 10.5% and 8.5%, respectively. Independents also increased their share of the US consumer tire wholesale distribution channel, or a half-point, from 2017 s 79.0% to 2018 s 79.5%. Tire company stores share didn t change, at 7.0%, while miscellaneous outlets decreased to 13.5%.
Consumers Know When and Where to Buy Tires According to a 2018 Modern Tire Dealer consumer survey, 46% of them decided to buy new tires because they noticed treads were low/worn, followed by flat or damaged tire, 45%; and my technician indicated the need, 36%. Based on those indications, 23% of consumers said they immediately bought tires, while another 13% did so within less than 24 hours and 12% within one day. According to the J.D. Power 2019 US Original Equipment Tire Customer Satisfaction StudySM, Michelin scored the highest in three vehicle segments: luxury, passenger car and truck/utility while Goodyear had the highest score in performance sport.
Tariffs Force Truck Tire Imports from China to Thailand Tariffs effect on the truck tire market was apparent during January 2019 when they were implemented after a delay from late 2018. Chinese imports during December 2018 were 62% more than the rest of the year in anticipation of less inventory/higher prices. Then, during Q1 2019, Chinese imports of radial truck tires decreased 25%, to 1.4 million units. This resulted in many companies/wholesalers switching their imports from China to Thailand, increasing its imports 39.7% during Q1 2019. Because of these developments, the US Tire Manufacturers Association (USTMA) forecasted during June 2019 a 6.0% decrease in imported shipments for the domestic replacement and OE markets for all of 2019.
Advertising Strategies With independent tire dealers gaining additional market share, it s important local dealers advertise aggressively to maintain and grab even more of the market and TV is where they will generate more brand awareness. Independents should also emphasize consumer truck tires as trucks, SUVs and vans continue to lead passenger vehicles in monthly new-vehicle sales. Consider incentivizing sales with discount coupons for truck accessories: bed liners, hitches, etc. Use pending or recent weather events during winter as well as other seasons to convince consumers that now is the best time to inspect, repair and/or purchase new tires, emphasizing safety and less likelihood of travel disruptions bad tires can cause.
New Media Strategies Consider a poll or survey on social media to gather data from local consumers. In exchange for a coupon, ask them to indicate what kind of vehicle they drive, the last time they bought tires, do they commute every day, do they take long road trips or drive off-road, etc. Have your technicians record short videos explaining a safety tip about tires, how to change a flat, the extra steps they take to ensure tires are safely installed, etc., and post them to social media. Help reduce consumers confusion about all the tire sizes by highlighting one each in a series of social media posts. Explain which type or brands of vehicles require a certain size, which vehicles can use different sizes and why to choose one instead of another, etc.
