Bob Ulrich

Editor

Bob Ulrich was named Modern Tire Dealer editor in August 2000. He joined the magazine in 1985 as assistant editor, and has been responsible for gathering statistical information for MTD's "Facts Issue" since 1993. He has won numerous awards for editorial and feature writing, including five gold medals from the International Automotive Media Association. Bob earned a B.A. in English literature from Ohio Northern University and has a law degree from the University of Akron.

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With tire demand greater than supply, who will fill the void?

By: Bob Ulrich

When supply is greater than demand, tire manufacturers tend to reduce supply. Maybe they shift to a five-day production schedule. Maybe they close a plant. But they all find ways to reduce costly inventory.

In this scenario, dealers are happy -- especially when sweet "we need to get rid of these tires" deals fall into their collective laps.

When demand is greater than supply, tire manufacturers sell everything they have, but can't keep fill rate percentages at an acceptable level. Dollars are good, but good will is bad.

In this scenario, dealers are not happy -- and if the fill rates are too low, they will look elsewhere for the tires they need. This is when little known tire manufacturers can make names for themselves.

The cyclical nature of supply and demand makes this possible. However, poor projections on the part of a manufacturer helps exacerbate the gap.

When I first joined Modern Tire Dealer in 1985, there was only one Asian brand with replacement passenger tire market share of at least 1% -- Bridgestone at 2%.

The nature of supply and demand is cyclical, so it's natural that as the global marketplace grew, so, too, would overseas tire manufacturers.

Twenty-five years later, there are eight Asian brands in the top 30 (none of them from China). Bridgestone remains the top Asian brand at 7.5%, but Hankook and Kumho also are in the top 10. Rounding out the Asian contingent are Falken, Toyo, Yokohama, Nitto and Sumitomo.

The Korean brands really made in-roads in 1997 and 1998 when domestic manufacturers drastically underestimated record shipments.

During that time, profits were good, but Asian brands proved their worth. Domestic tiremakers never have regained the market share they lost.

Are we in the midst of a similar cycle? Demand is far greater than supply, and based on the inventory reduction that took place last year, I assume many of the tire manufacturers were caught off-guard.

Once again, there is an opportunity for a foreign tire manufacturer or two to come in and grab market share. Chinese companies are hampered by the 39% tariff on their consumer tires, but if they can fill a void, they may one day be supplying the United States with some of its most popular brands.

What do you think? Which country or countries do you feel will take advantage of the situation?

Related Topics: Chinese imports, Market share, Supply and demand, Tire tariffs