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August 19, 2014

Tire prices have risen 1.3% since July 1

Tire pricing in the aftermarket is stabilizing. So says industry analyst Nick Mitchell.

July marked the third consecutive month of firmer retail pricing for consumer tires, according to Mitchell, senior vice president of research for Northcoast Research Holdings LLC. The average price of a light vehicle tire in the company's sample of more than 20,000 consumer replacement tire SKUs rose 0.8% on a sequential basis.

"The average price of the most popular passenger tires was up 0.2% to $120.72, while the average price of the most popular light truck tires climbed 3.6% during the month to $170.30," he says. "However, the headline performance benefited from a greater SKU count of higher priced Hankook tires -- especially light truck -- carried at one of the retailers in the sample.

"That said, we believe the underlying data showed signs of stabilization as the rate of declines in July were consistent with the declines seen in May and June."

Following several quarters of price declines, the average tire price has increased 1.3% third quarter to date compared to the average price during the second quarter, "which is encouraging given the 0.4% sequential decline between 2Q '14 and 1Q '14, and the 2.2% drop between 1Q '14 and 4Q '13."

The average price of a value tire increased 3.7% during July while the average price for a premium tire decreased 0.4%. The cost of the average mid-tier tire increased 0.3%.

"We believe a portion of the modest decline in premium branded tires was due to out-of-stocks on several high price-point premium tires, as we continue to hear from the channel that the demand/supply relationship for Tier 1 product remains very healthy," says Mitchell.

"Our research on the retail pricing environment implies that the downward price pressure on passenger and light truck tires remained at bay during July, with the remaining price realignments on certain brands and SKUs occurring in a very rational manner, and consistent with the price cuts happening upstream."

In order to monitor pricing trends in the consumer replacement tire market, Northcoast Research developed the Northcoast Research Tire Pricing Index, which is a proprietary data set comprised of retail prices.

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