Truck tire market 2014
It should be a good time to be a commercial truck tire dealer. According to the Quarterly Commercial Vehicle Report by IHS Automotive driven by Polk, there were 11,850,000 commercial vehicles registered for use on U.S. highways in December 2013. That was 255,000 more than in the previous year.
As fleets get bigger, their profit potential increases, too. That’s where you come in.
Part of being a good commercial tire dealer is helping your fleet customers conduct good tire management. A customer that is profitable and competitive is going to be around for a while and keep buying tires.
Are fleets buying tires this year? We asked three commercial tire dealers to describe how their sales of heavy, medium and commercial light truck tires are tracking.
A rough winter had a huge effect on sales early in the year.
“Right now, we’re trending up slightly over last year, and we believe it’s going to be a fairly good year,” says David Langerak, COO of Wonderland Tire Co., a five-location dealership based in Byron Center, Mich. Wonderland Tire is No. 71 on the 2014 Modern Tire Dealer Top 100 Retreaders in the U.S. list.
“Here in the North, the winter was severe, and we had very poor sales in January and February because of that. We were down 10% compared with last year and we suspected it was directly related to the weather. Then we were up 10% in March over last year and again in April, so it’s trending upwards nicely.”
Langerak says there is a psychological aspect to low sales during severe winter weather because people are not in the mood to buy. He says in a severe winter, commercial fleets are challenged just to keep their trucks running and on the road, and to keep their trailers out of the snow banks.
“I would say through May, we’ll probably be up around 5% over the same period last year. We expect that to be better as the year goes on.”
Flat 2013, hopeful 2014
Langerak says Wonderland’s 2013 sales were flat. The dealership wasn’t alone in that regard.
“In comparison to 2013, we are happy that we’re a little over 2% up in sales,” says Thomas Bowman, vice president of Belle Tire Distributors Inc.’s Commercial Division. Headquartered in Allen Park, Mich., Belle Tire has three commercial and two commercial/retail stores in addition to 83 retail operations. Belle Tire is No. 20 on the MTD Top 100 Retreaders list and number eight on the 2013 MTD 100 Top Independent Tire Dealers in the U.S. list.
“Last year at this time, sales were relatively flat, and so was 2012, but 2011 was a phenomenal year for medium-duty, heavy-duty and commercial light truck tires,” says Bowman.
“Here in the Northeast, our business has been flat, and sales were terrible this winter,” says Jim McCurdy, president of Maine Commercial Tire Inc., a seven-store operation headquartered in Hermon, Maine, and No. 80 on the MTD Top 100 Retreaders list.
“This past winter, there were days when we couldn’t send our trucks out to do pick-ups and deliveries. A big percentage of our revenue comes from our road trucks that pick up tires to be brought back for retreading, and we deliver tires. If you’re doing $65,000 a day in billing and you have a blizzard, you don’t send your truck out and that $65,000 is gone forever. If you have four days like that in a month, you’re talking about hundreds of thousands of dollars’ worth of revenue that didn’t get delivered and you just lose that working day.”
McCurdy says sales started picking up in April and the increase continued into May.
“If our customers are having a good year, we have a good year. If something happens that slows our customers’ business down, like a heavy winter with a lot of snow and ice, then our business slows down.”
McCurdy predicts his sales will be strong in the last two quarters of 2014.
“Because we got such a slow start with the severe winter, I think we’re going to end up even in all three categories.”
“Right now sales are awesome,” says Belle Tire’s Bowman. “We opened strong in May and it hasn’t slowed down yet, and that is because of our frost laws. In Michigan and Ohio, the Department of Transportation issues frost laws where you can only carry a certain amount of weight per axle. They lifted the frost laws on April 25. March and April sales were slightly increased from 2013.”
Bowman believes that through the end of the year, he is going to see a moderate sales increase of anywhere from 3.5% to 4% in commercial truck tires.
“I attribute a lot of that to the current demand for construction,” he says. “Every road in the country needs some work done and Michigan is on the list of states with the worst roads in the U.S.
“Housing is starting to take off again. Any time there’s new construction, you’ve got a lot of people hauling materials and that takes trucks. Those are all good indicators for strong tire sales.”
Last year in our coverage of heavy truck, medium truck and commercial LT tires, some manufacturers told us they were seeing fleets turning to smaller trucks to save on costs. McCurdy, for one, isn’t seeing that with his fleet customers.
“We do business with long-haul truckers, and if you’ve got over-the-road fleets they have to have tractor trailers. They can’t have smaller equipment,” he says.
“We’ve got waste companies and they can’t go to smaller vehicles because they’ve got those heavy-duty rear-end packers. We’ve got construction companies and they can’t downsize because they want the biggest dump truck they can haul gravel in. The vocational guys are the regional haulers, UPS, Pepsi-Cola and the grocery guys; they can’t downsize, either.”
Obsessed with improving their costs per mile, fleets are turning to alternative fuels and low rolling resistance tires. Over the last six years, McCurdy has seen more fleets using natural gas.
“As far as fleets cutting costs, we’re seeing a lot of propane-powered vehicles coming out,” says Bowman. “You’re seeing more and more of the brown box vans, such as UPS and Frito-Lay trucks, running on propane and also natural gas. It really doesn’t affect our business because they’re still running on tires. The reason they’re doing it is it is good for the environment and it’s cheaper than diesel. Tire wear is the same no matter the fuel.”
Demand for more service
All three dealers said that in recent years, many fleets are demanding more service from them. All three offer 24/7 emergency road service to help provide it. Maine Commercial takes it one step further than that.
“One unusual thing that we do is perform fleet checks on weekends,” says McCurdy. “Some trucks can only be viewed when they park on the weekends. Construction equipment is one example. Maine Commercial Tire has a dedicated fleet inspection employee whose job is to gather data (air pressures, tire condition) for our customers.”
“I would say the most demanding thing we’ve run into over the last couple of years is the SmartWay program,” says Wonderland Tire’s Langerak.
“Anybody going into California is required to run tires that are SmartWay-approved both for new tires and retreads. We have a fair amount of customers, especially in Michigan, who go to California or states close to California, and they haul product back to Michigan. Those guys are now trying to be in compliance with SmartWay more and more.”
Langerak says his fleet managers report that over the last 10 years, there has been a trend toward fleets performing more of their own services. That includes tire service.
To address that issue, Wonderland Tire offers customized, full-service programs.
“We go in several days a week at certain times of the day, and we do a full visual inspection of the tires for flats, low tread and low air pressure; pull anything off for repair or replacement; fill out the paperwork; do the reporting for them; and do all the retreading and repairing, rim refinishing, wheel polishing and whatever else the customer needs.”
At Maine Commercial Tire, McCurdy says his focus has been on helping his fleet customers “do the math” and look at cost-per-mile rather than tire price alone.
“We’ve forced this issue on some fleets by saying, ‘Look, you’re losing half your mileage on a steer tire by not buying a quality tire. Let us do fleet inspections, let us do a cost-per-mile analysis for you and we can show you where you can save money by using a better-quality product.’
“We go out there and say, ‘Let us take you out of the tire business. You don’t know as much as we do about tires. Let us be your tire guy. I guarantee you we’ll save you money.’ Usually that works.”
When it comes to servicing fleets, the key is performing more yard work, says Bowman. “We are seeing our fleet customers demand more types of service from us now. We’re doing more yard work for them on the weekends to identify their tire issues. Yard work includes checking the tire pressure, checking all the vehicles and making sure the tires are matched up correctly. A lot of times a tire is damaged and the drivers don’t know that.”
Bowman also gives his fleets “better bang for their buck” by offering a wheel reconditioning program, performing fleet surveys and doing tire rotations.
“We match out their tires. We do trailer inspections, glass replacement and glass repair. It keeps their trucks road worthy and helps them maintain their maintenance ledgers.
“We always had been able to offer these services, but we’re seeing more and more demand for these services in the past four or five years.”
HD pickups, China, price
Wonderland Tire, Belle Tire and Maine Commercial all experienced reduced sales due to a tough winter. Wonderland Tire and Belle Tire expect 2014 sales to be up over 2013; Maine Commercial expects a flat 2014. The dealerships are also seeing some of the same trends.
“We’re seeing a trend currently of contractors and the guys that are using the one-ton pickup trucks going from a light-duty one-ton to a heavy-duty one-ton,” says Wonderland’s Langerak.
“They are going from a Ford F-350 to an F-550 and even F-650 because they were overloading the lighter-duty trucks and they want to be in compliance. Because of that, we’re seeing a trend away from 16- and 17-inch to 19.5-inch.
“With commercial light truck tires, we’re seeing a trend toward the 19.5 sizes because they are opting for a heavier-duty light truck vehicle for their commercial business; it holds up better for them.”
Langerak says another trend he is seeing is the influx of Chinese-made tires. Some of his fleet customers now ask for them.
“They tend to be customers that do their own tire service, so they’re more independent of what we might recommend. Some of these guys even band together and buy them direct from China by the container load.”
Maine Commercial’s McCurdy has seen not only an increase in demand for Chinese and other low-priced tires, but also improvement in their quality.
“Over the last three or four years, the low-priced tires have evolved and they are much better now than they were. We started selling more of these tires because some of them are as much as $100 cheaper per tire than some of the name-brand truck tires.”
McCurdy says that when it comes to retreadability, many new Tier Three tires now are similar to Tier Two tires.
“That $100 per tire difference means the second tier tires are losing sales. We wind up selling more third tier tires than we’d like to, but if we’re not going to sell lower-priced tires, we’re not going to sell tires.”
Belle Tire’s Bowman sees a similar trend. “The biggest change I’m seeing this year versus 2013 is the influx of the Tier Four product, the majority coming from China.”
Bowman says these lines usually have steer, drive and trailer tires in four to five sizes. Very few are wide-base or trash hauler application type tires.
“The lines are pretty stripped down and dirt cheap with no programs; they are all purchased by the container. The thing that concerns commercial dealers like me is that if a fleet is retreading, Tier Four products from China are right in the price range of retreads.”
Bowman says Belle Tire does stock these tires so that they don’t lose a sale when a customer requests them, and then they “sell them up from that point.” He says Tier Four is defined strictly by price and has been around for about a year.
“The last four or five months of 2013, we started seeing more Tier Four tires. We had never even heard of a lot of this stuff coming out.”
Bowman says he is also seeing some of Belle Tire’s fleet customers making the switch to wide-base tires. With that comes another sales opportunity.
“In the last six to seven months, we’ve been seeing more wide-base tires, the 445/50R22.5s, the 455s and the 55R22.5s. We are converting a number of fleets over. They’re doing it for the simple fact that it’s more fuel efficient buying one tire instead of two tires. The nice thing about it is they have to buy a wheel to go along with it, and that’s where you can make some money.”
Another extra sell opportunity is refinishing of the wheels.
“We’ve been doing wheel restoration for some time now, and we have a new process in place that has helped us increase our production,” says Bowman. ■
Rolling resistance: a breakdown
Commercial dealers tell MTD that their customers are becoming more conscious of fuel efficiency. Here is what the Tire Retread & Repair Information Bureau (TRIB) says about rolling resistance and some of the other factors that can influence fuel economy.
1. Each wheel position contributes to a portion of a vehicle’s total rolling resistance. Drive and trailer tires account for approximately 85% of a vehicle’s total rolling resistance. A standard configuration tractor trailer’s rolling resistance by position is:
• steer tires — 15% contribution to rolling resistance;
• drive tires — 44% contribution to rolling resistance;
• trailer tires — 41% contribution to rolling resistance.
2. Much of the rolling resistance of a tire comes from the tire tread (35% to 50%).
3. Shallow original tread tires have lower rolling resistance than deep original tread tires. Rib design tires have lower rolling resistance than lug design tires.
4. Worn tires have lower rolling resistance than new tires. Here are the effects of remaining tread depth of a tire on rolling resistance and fuel efficiency:
• 30% worn can improve fuel economy by 2%;
• 50% worn can improve fuel economy by 4.5%;
• 80% worn can improve fuel economy by 6.5%.
If a rolling resistance improvement is made with tread compound only, the improvement diminishes as the tread is worn down to zero tread depth.
A look at popular sizes: Sizing up medium and commercial LT tires
We asked Belle Tire Distributors Inc., Maine Commercial Tire and Wonderland Tire Co. what their top three most popular selling sizes are for medium-duty and commercial light truck tires. How do these sizes stack up to the Rubber Manufacturers Association’s (RMA) list of the most popular replacement sizes in 2013?
Medium-duty Comm. light truck
Belle Tire 1. 11R22.5 1. LT225/75R16
2. LP11R22.5 2. LT245/75R16
3. 255/70R22.5 3. LT265/75R16
Maine Commercial 1. 11R22.5 1. LT245/75R17
2. 11R24.5 2. LT265/70R17
3. 295/75R22.5 3. LT225/75R16
Wonderland Tire 1. 295/75R22.5 1. LT245/75R16
2. 275/80R22.5 2. LT225/70R19.5
3. 11R22.5 3. LT225/75R16
RMA 1. 295/75R22.5 1. LT245/75R16
2. 11R22.5 2. LT265/75R16
3. 11R24.5 3. LT265/70R17
To read the entire June 2014 issue of Modern Tire Dealer, see the digital verison here.