Retail

Retail Tire Prices Rebounded in June, With A Lot of Help From Mid-Tier Tires

Posted on July 13, 2017

After two months of lower retail tire prices, things stabilized a bit in June. Industry analyst and Modern Tire Dealer columnist Nick Mitchell is calling it “a small win.” Light truck tires, and mid-tier products, are making the biggest gains.

The Northcoast Research Tire Pricing Index, created by Mitchell’s Northcoast Research LLC, reflects retail prices of more than 10,000 domestic light vehicle tires. In June 2017, the average tire price increased .2%, to $128.43. In the past year, the average tire price has increased $2.77, or 2.2%.

An average of the top 10 passenger tires shows an increase of .1%, while the average of the top 10 light truck tires jumped .5% in June.

When it comes to tiers, mid-tier tires showed the biggest recovery in June. The price of those tires (which includes the Continental, Cooper and Yokohama brands)increased .6%, compared to a .1% increase for value tires and no change for premium tires. (The index classifies Michelin, BFGoodrich, Pirelli, Goodyear and Bridgestone as premium.)

Year-over-year, the price of mid-tier tires has increased 3.6% — by $4.14.

“Despite the firmer pricing environment at retail during June and some early evidence that channel inventories were reduced in the final month of the quarter, we believe the channel is still dealing with higher-than-planned inventory levels following weak sell-out trends in the first half of 2017.

“Efforts to right-size inventory include increased promotional activity downstream and upstream, with the latter largely, albeit not entirely, concentrated in the Tier 2 and Tier 3 segments of the market. That said, we believe that the promotional activity has stabilized in recent weeks.”

Tire dealers previously had reported more promotional activity from manufacturers “in response to weak sell-out trends and elevated channel inventory coming out of the first quarter of 2017. These actions were not entirely surprising, as we flagged this risk towards the end of the first quarter; however, the structure, magnitude, and duration of the effective price discounts in the U.S. have been a little more aggressive than we expected, especially in the Tier 2 and Tier 3 segments of the market.”

The pressure points

Dealers have identified a few pressure points. Some noted producers of imported, non-Tier 1 labels have been “pretty aggressive in the quarter,” Mitchell says, “mainly those based in South Korea, Indonesia, Taiwan, Thailand and Singapore.”

Private label, Tier 4 tiers are also playing a part in the pricing game. Mitchell believes Tier 1 tire makers have also become more promotional since the end of the first quarter.

Another factor is “a sharp reversal in the prices of key commodities,” which Mitchell says has made “many manufacturers reluctant to take additional pricing actions.” (His raw material monitor shows a 2.7% decrease in the basket of raw materials for June. That marks five straight months of decreases.)

“To this point, many individuals are telling us that Goodyear’s second round of price hikes will not stick if raw material costs stay at these levels."

“While the manufacturers continue to implement disciplined production schedules at domestic plants in order to control inventory levels downstream, we think the market needs to see an uptick in sell-out trends before the promotional activity meaningfully moderates. That said, we view the early signs of stabilization in June as a small win.”

By the brand

For overall light vehicle tires, here’s a look at the brands that showed retail price increases in June:

Tire brand Percent change
Bridgestone 1.7%
Continental .7%
Cooper .5%
Dunlop 1.5%
Pirelli .5%
Yokohama .8%
Other .1%


These tire brands reflected retail price decreases in June:

Tire brand Percent change
BFGoodrich -.6%
Goodyear -.8%
Hankook -1.2%
Michelin -.5%


Here’s a close-up on light truck tire prices, through the lens of the top 10 LT tires, which increased .5% during the month.

The price of these LT tire brands increased in June 2017:

Tire brand Percent change
Bridgestone .6%
Continental 2.7%
Cooper .6%
Dunlop .7%
Michelin .5%
Pirelli 2.2%
Yokohama .7%


The price of these LT tire brands decreased in June 2017:

Tire brand Percent change
BFGoodrich -.2%
Goodyear -.8%
Hankook -1.6%
Other -.1% 


Outlook

“Notwithstanding the recent setback in pricing trends in April and May, we continue to believe that the pricing environment in North America remains generally consistent with our expectations, as we have seen retail tire prices across the U.S. increase in six of the past nine months,” Mitchell says.

To see how the picture has changed in the last two months, read:

Tire Prices Fell in April, but...

Retail Tire Prices Fell Again

Related Topics: Nick Mitchell, Northcoast Research Tire Pricing Index, tire prices

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