If the future were any brighter for LT tire sales, you’d need to wear shades
Because of the dicey economic conditions of the recent past, many customers held off on tire purchases. This caused a not unexpected small decrease in the replacement market for light truck tire units in 2012 when compared with 2011 (28.3 million vs. 28.6 million units shipped) according to the MTD January 2013 Facts Issue.
However, there continued to be increased demand at the original equipment level (4.2 million vs. 4.1 million in 2011). This was due to an increase in the sale of new SUVs and light trucks last year, which is likely to continue in 2013.
Paul Taylor, chief economist of the National Automobile Dealers Association (NADA), recently said, “Old cars on the nation’s roads and available credit assure a good year for car sales as the economy continues to make modest but positive progress in overall growth.”
Here are several of the key factors that he feels will support stronger auto sales in 2013.
1) Pent-up demand. He notes that the average age of vehicles on the road is a record 11.1 years for cars and 10.4 years for light-duty trucks. This shows a lot of pent-up demand for new vehicles, which should help propel sales this year.
2) Available credit. There are low interest rates available for auto loans to help motivate consumers to finance a new vehicle purchase in 2013, Taylor said.
3) Buying options. More new vehicle choices are available at dealerships, with greater consumer appeal in design and fuel efficiency.
4) More job security. Modestly declining unemployment is leading to more consumer confidence. “Consumers now expect to avoid layoffs.”
5) New vs. used. There is a used-vehicle shortage at the dealerships due to the recent recession.
Industry analysts at R.L. Polk & Co. forecast that 2013 U.S. light vehicle registrations will total 15.3 million units, up 7% from 14.4 million in 2012. And they see new registrations reaching 15.8 million in 2014 and 16.2 million in 2015.
These predictions seem to be on target. According to WardsAuto (www.wardsauto.com), light vehicle sales for the first two months of this year totaled 2.23 million units, an 8.5% improvement over a year ago.
Drilling down a little further, the latest year-to-date sales figures for light-duty trucks showed growth in almost all categories — from pickups and cross-overs to small, large and luxury SUVs, according to www.motorintelligence.com. The largest growth was in the cross-over category, which was up by 15.2%. The only exception in this segment was the minivan, which showed a 5.2% decrease.
One thing that could de-rail the positive forecast for light vehicle sales is rising gas prices, Polk noted. This could have an impact “on the mix of vehicles if not overall demand.”
One thing is clear: You add pent-up demand due to the recession with the continued popularity of this market segment, and the future looks bright for light truck tire sales down the road.
Kauffman Tire Inc. in Seville, Ohio, is one of the company’s 55 retail and commercial locations located in Ohio, Georgia and Florida. The company also has 14 wholesale distribution centers in seven states and an e-commerce site, Tread Depot. It is tied for 17th on the Modern Tire Dealer 100 list of largest independent tire chains in the United States. It sells a wide variety of light truck tires, including Goodyear, Kumho, Michelin, Pirelli, Cooper, General, Toyo and Continental.
Jim Phillips, commercial and retail district manager, said the most important feature his customers are looking today for in a light truck tire is value.
“We average it out as a cost per mile,” he said. That helps illustrate to his customers what they are getting for their money. “If it’s a 60,000-mile tire, you divide the cost out by the miles, and we tell them that over the course of those miles, this is what you’re paying per mile.
“If you break it down that way, customers understand the cost more, and it doesn’t hurt as bad when they spread it out over those many miles. And we also offer financing through our credit card.”
According to a survey of MTD’s National Advisory Council members, 58.3% feel customers’ first priority when buying light truck tires is long mileage. This is followed by a smooth ride, a quiet ride and the lowest cost possible. Traction also was noted as a desired feature, especially given the increase in off-road events following the recent upturn in the economy.
Overcoming sticker shock
Overcoming sticker shock can be a problem for dealers facing light truck tire replacement buyers. To combat the issue, dealers told us they:
• show them comparisons of all tires in that segment and explain the differences between LT and P-metric tires. They also illustrate that the LT tires are more robust than a passenger tire.
• take the time to explain features and benefits of premium versus other levels, and then sell on benefits.
• talk about performance and what they receive now versus 10 years ago.
• educate by discussing the benefits the customer can expect to get, and then show the costs associated with those benefits.
• have in-house financing options available, such as six months no interest.
“It’s no worse than the sticker shock we inflict on our passenger tire buyers,” a dealer told us. “We blame the high prices on the car and truck manufacturers. I think there’s a greater degree of acceptance to the fact that all tires carry a big price tag.”
“Every tire sale seems to have sticker shock,” noted another council member. “Always follow the five points to a sale. It doesn’t matter what type of tire you are selling.”
Where dealers go to market
Kauffman Tire markets its light truck tires by direct-mail, on its website (www.kauffmantire.com) and via social media. “We still do some newspaper advertising, too, believe it or not,” Phillips said.
When considering marketing of light truck tires, it’s important to note that a good percentage of light truck tire buyers are women, survey respondents noted (see chart). Probably around 40% of Kauffman’s Tire’s light truck tire customers are women.
“If you consider the cross-over market as far as light truck tires, there are a lot more women making financial decisions in U.S. households,” Phillips said.
Nearly 77% of the dealers surveyed use their websites to promote their light truck sales. This is followed by direct mail pieces, social media and newspaper ads.
Plus, don’t forget to dress-up your showroom. “Point-of-sale displays get customers thinking (and planning financially) ahead when they may be in our dealership for other services,” a dealer told us. ■
U.S. light truck tire units shipped
Year Replacement OE
2012 28.3 4.2
2011 28.6 4.1
2010 28.0 3.5
2009 26.0 2.6
2008 30.0 3.0
Source: Modern Tire Dealer