Consumers traded down when buying replacement tires in December, but Industry Analyst Nick Mitchell said even though Tier 1 tires were the worst performers, the news could be worse.
Tire dealers reported consumers bought lower-tier products in December as their budgets became stretched during the holiday shopping season. And the data from the Northcoast Research Tire Demand Index supports that view, with Tier 2 tire brands performing the best.
“In our opinion, the fact that the trade-down phenomenon was not acute enough to push the Tier 3 category to the top of the list suggests consumers still prefer the high-performance qualities found among Tier 1 and Tier 2 brands."
“More importantly, we believe the recent shift in preference back toward Tier 1 and Tier 2 product is another sign that underlying trends are starting to normalize after three challenging quarters.”
When looking at the longer term, Mitchell said Tier 3 brands have been ranked or tied for last place by tire dealer respondents in 20 of the past 40 months — that’s half the time.
“In our opinion, this is consistent with the channel commentary that the demographics of the car parc and a stronger consumer should benefit Tier 1 and Tier 2 brands.”
Mitchell said tire makers like Goodyear Tire & Rubber Co., who talk constantly about high-value-added tires, stand to benefit. He also noted that the long-term trend gives insight into a consumer’s thought process in the buying process.
“Many consumers have no qualms about paying more for a premium brand in this improving economic environment, as long as they feel like they are obtaining a product with leading technology and performance capabilities, especially if they own a late model vehicle.”