A hitch in trailer tire sales?: Some say niche segment still carries weight
Two years ago, the utility trailer market was soaring. Consumers, buoyed by plenty of disposable income thanks to a strong economy, were snatching up units at near-record rates while specialty tire manufacturers, marketers and dealers raked in the proceeds.
Since then, the general economy has tumbled and many consumers are thinking twice about buying boats, motorcycles, all-terrain vehicles and other luxury items. But has this newfound fiscal conservatism spilled over into the replacement utility trailer tire market? That all depends on whom you ask.
"People just aren't buying," says Ray Evans, Titan Tire Corp. executive vice president of engineering, marketing and sales. "The market is flat."
Glynne Miller, marketing director for Greenball Corp., says his company's trailer tire business "has remained remarkably strong. We're doing more at the original equipment and replacement levels than last year."
Victor Li, director of marketing for Tireco Inc., says the market remains active. "Normally, the trailer tire industry will mimic the economy, going up when it's good and down when it's bad."
Hank Chang, marketing manager for Kenda USA, which imports specialty tires from plants in China and Taiwan, says business is down.
Part of the reason is that offshore manufacturers from Asia who can afford to reduce their prices due to lower production costs are squeezing the domestic market, according to Chang. Many of the same firms are ignorant of North American utility trailer tire market dynamics, he says, which sometimes works to Kenda's advantage. "These guys don't have a presence in the U.S., don't know what's going on and don't know what the market price is, so they sell tires based on weight."
In response, Kenda has lowered its utility trailer tire prices during the past year. "On one hand, we need to match some (off-shore) prices, but on the other hand, we don't want to."
Titan is less specific but "we've had to become more price-competitive," says Evans.
Chang also says utility trailer tire price hikes are hard to enact due to low-priced imports. "Once you raise a price, your customer will switch to a competitor."
That didn't deter Carlisle Tire & Wheel Co. from boosting trailer tire prices earlier this year. "We're by no means a low-dollar supplier," says Rick Willey, a Carlisle product manager. "We usually get more for our products" than offshore manufacturers.
Greenball, for its part, hasn't raised prices and cites no need to in the near future.
A number of manufacturers say utility trailer tires have become commodity items. Willey attributes the demotion to the proliferation of recreational trailers.
Tiremakers pour at least two million original equipment trailer tires into the market each year to equip new units, he says, "and (trailers) themselves have a life expectancy that's longer than automobiles."
Certain sizes, especially, have assumed commodity status, including 480-8, B78-13, F78-15, 700-15LT and 750-16LT, says Tireco's Li. "One of the main reasons is the relatively low cost of bias vs. radial."
Willey says while "the opportunities for profit are substantially reduced when products reach commodity status," trailer tire dealers will still benefit when replacement time rolls around. "Trailer tires operate at 100% of their capacity, so their strength is being used up at a much greater rate. And trailer tires should be replaced every three years" (although he admits most people run them longer until they fail). The replacement market is fairly strong from our viewpoint."
Service and stock
Good times or bad, utility trailer tire dealers can ensure their profitability by providing top-notch service, say dealers.
Smart retailers will keep the following concepts in mind when selling to end users, according to Larry Inchiostro, owner of St. Louis (Mo.) Wholesale, which distributes several thousand trailer tires a year, including the Greenball brand, to hundreds of customers in Missouri, Kansas, Iowa, Kentucky and other surrounding states:
1. Air pressure. Encourage customers to maintain proper psi levels.
2. Correct use of ply ratings. "There is a belief that more plies are better, but that isn't necessarily true." Extra plies lead to increased heat build-up, which will cause tires to deteriorate faster, Inchiostro says. "If all you need is a six-ply tire, why put a 10-ply tire in there?"
3. Winter parking concerns. Owners who take their trailers out of circulation during the off-season "should jack them up and get the pressure off the tires. Otherwise, as the tires age, they will show sidewall deterioration wherever their bottoms were." Lightening the loads on unused trailer tires produces the same end result as rotating passenger car tires, according to the wholesaler: significant tire life extension.
Overcoming customer ignorance can be an uphill battle at times, says Bill Short, president of Leininger & Short Inc. in Ontario, Calif. Leininger & Short sells trailer tires, primarily Tireco units, at its single-location retail shop, plus wholesales them to other dealers. "The biggest problem I see is that customers do not know what their trailers weigh. They don't realize each trailer is rated to carry a certain weight."
Many trailer tire buyers operate under the misconception that bigger and heavier tires will solve the problem, "but that won't cure anything. Customers modify their trailers for different purposes, which changes the weight factor. Others keep increasing the load little by little. And some are in denial. A lot of times you'll have customers look at you like they'd rather not know!" The best way to solve the problem is to tell them directly, Short says.
Keeping close tabs on trailer tire inventories, both present and past, also is important. "In watching inventory and product movements, you know what to order." Leininger & Short keeps previous-year sales figures in its computer system so salesmen can compare now vs. then.
And having a wide selection of tires on-hand helps. "Most of this stuff is imported, so if it's out-of-stock, customers may have to wait."
Sunny days ahead
Utility tire market players are optimistic about the segment's future despite differing opinions regarding its present. "The industry has been through this cycle many times," says Titan's Evans, who predicts a market upswing by the second quarter of next year. "It's not a death knell."
"We hope that in a year the economy will rebound," says Kenda's Chang.
Others say the time to make hay is right now. "If (dealers) aren't selling tires, there's something wrong," says Carlisle's Willey.
The trailer tire segment is market-driven, according to Greenball's Miller. "What happens to trailer manufacturers really affects us." If consumers back off on recreational activities, "it will have an effect on the replacement market. But the bright spot is that disposable income in North America is still quite high."
Tireco's Li agrees. "The increasing number of recreational vehicles sold in the U.S. continues to show strength. The trailer tire market will grow."
Ask first, sell LT tires later
The vast majority of utility trailers in North America are hauled by pick-up trucks and SUVs, which, of course, require tires of their own. Should towing a trailer determine what type of light truck tires customers use? There's no blanket standard, according to Bill Short, president of Ontario, Calif.-based trailer tire retailer/wholesaler Leininger & Short Inc., which also sells passenger and light truck tires. "It depends a lot on how much they're towing and how far."
Tongue weight, or the amount of weight placed on a truck hitch, is an important consideration, he says. A heavier load might require a light truck tire with more plies. "Sometimes these guys just need more truck!" Short jokes.
"But seriously, you have to ask the customer a lot of questions. Find out what he's doing, how much he's pulling, how far and then give him the best suggestion."