According to the results of our survey, demand for replacement tires increased in May. From a volume standpoint, the dealers reported they sold 0.3% more tires in May on a year-over-year basis, following a 0.2% increase in April and a 0.3% decrease in March. We are encouraged by the fact that demand trends remain positive after the sharp decline witnessed in February.
Notwithstanding any recent softness in demand trends, we continue to believe that the abundance of pent-up demand should lead to decent volume growth throughout the remainder of 2015, despite the fact that 2014 provides tough comparisons. In fact, demand has increased on a year-over-year basis for 14 of the past 15 months, according to the dealers surveyed. Furthermore, most dealers stated they anticipate trends to improve throughout the next three months of this year.
Monthly survey
A number of independent tire dealers were surveyed concerning current business trends. Except for tire prices and costs, the results of the May 2015 survey are compared with those of May 2014.
Dealers believe sales trends should improve
According to the survey results, 44% of passenger tire dealers believe business will improve over the next six months, while 56% believe it will stay about level.
The outlook for truck tire demand was slightly stronger as 56% of the truck tire dealers we spoke with see business improving, while 44% believe it will stay about level.
The table highlights the outlook respondents have conveyed to us in recent months.
Replacement tire sales volume trends improve
According to our survey, consumer demand for replacement tires increased in May. As stated, the dealers in our survey reported they sold 0.3% more tires In May on a year-over-year basis, following a 0.2% increase in April and a 0.3% decrease in March.
Trends turned slightly positive in the truck category as the dealers who responded to the survey reported that volumes increased 2.2% after a 0.4% increase in April and a 6.6% increase in March.
Lastly, the survey respondents indicated that volumes increased 2.3% in the retread business after increasing 1.5% in April.
Dealer costs decline
The tire dealers who responded to the survey noted that manufacturer pricing on value and branded tires declined on average in May. In fact, the respondents noted that manufacturer pricing on value tires decreased 0.4% during May, while the price of branded tires declined 1.5%.
The decrease in both branded and value tires is not entirely surprising given the fact dealers noted that price declines were mostly due to tire manufacturers being slightly more aggressive with promotions as of late; however, it is important to remember that one month’s results do not make a trend.
Dealers’ thoughts on inventory
Of the dealers who responded to the survey, 67% indicated they had the appropriate amount of inventory in stock for demand (vs. 50% in April), 22% indicated inventory levels were too high and 11% indicated inventories were too low.
The inventory levels among the surveyed truck tire dealers were near optimal levels as 78% of those surveyed indicated they had the appropriate amount of inventory, while 22% of respondents noted inventory levels were too high, and no respondents indicated inventories were too low.
Repair sales rose in May
Dealers we surveyed indicated automotive repair sales trends improved once again in May. Specifically, the dealers who responded to the survey indicated service sales, which accounted for 15% of the participants’ total revenues, were up 9.6% on a year-over-year basis in May. And that’s on top of an increase of 12.3% in April, as a higher average ticket and strong traffic trends benefited repair departments. ■
Nick Mitchell is senior vice president of research for Northcoast Research Holdings LLC based in Cleveland, Ohio. Mitchell covers a variety of subsectors of the automotive industry.
To read more Your Marketplace columns, see:
Lower gas prices should lead to decent volume growth in 2015
Strong traffic trends benefitted repair departments
Higher average service tickets more than offset weak traffic trends
