Reacting to tariffs, manufacturers increase pricing on value tires
According to the results of our survey, demand for replacement tires was flat in January. Indeed, from a volume standpoint the dealers reported they only sold 0.1% more tires in January on a year-over-year basis, following a 0.7% increase in December and a 0.9% increase in November.
We were pleased to see volumes remain positive for the 12th consecutive month; however, volumes were pressured by the lack of harsh winter weather in several regions during a majority of the month.
Notwithstanding the minor setback from mild weather in January, we continue to believe the abundance of pent-up demand should lead to decent volumes throughout the remainder of the 2014-2015 winter selling season despite tough comparisons from last year’s harsh winter.
A number of independent tire dealers were surveyed concerning current business trends. Except for tire prices and costs, the results of the January 2015 survey are compared with those of January 2014.
Dealers believe sales trends should hold steady
According to the MTD dealer survey, 50% of passenger tire dealers believe business will improve over the next six months, while 50% believe it will stay about level.
Similarly, 50% of the truck tire dealers we spoke with see business improving, and 50% believe it will stay about level. None of the responding dealers thought business would worsen.
Replacement tire sales volumes are on par with 2014
According to dealer reports, consumer demand for replacement tires was flat in January. Dealers in our survey reported they only sold 0.1% more tires last month on a year-over-year basis, following the 0.7% increase reported in December and a 0.9% increase in November.
Trends were positive in the truck category as the dealers who responded to the MTD survey reported that volumes increased 2.7% after a 4.2% increase in December.
Lastly, the MTD survey respondents indicated that volumes increased 2.0% in the retread business after increasing 6.0% in December.
Dealer costs increased slightly
The tire dealers who responded to the MTD survey noted that manufacturer pricing on value tires and branded tires increased in January.
In fact, the respondents noted that manufacturer pricing on value tires increased 3.0% during December, while branded tires increased 2.2%.
The price increase in value tires is not entirely surprising given the recent duties put in place by the U.S. Department of Commerce on specific passenger and light truck tires imported from China.
Dealers’ thoughts on inventory
Of the dealers who responded to the MTD survey, 67% indicated they had the appropriate amount of inventory in stock for demand (vs. approximately 37.5% in December), while the remaining 33% indicated inventory levels were too high for demand. None of the surveyed dealers felt inventory levels were too low for business levels.
The inventory levels among truck tire dealers were very similar as almost 67% of the truck tire dealers we surveyed indicated they had the appropriate amount of inventory (vs. nearly 86% in December), while about 33% indicated inventory levels were too high.
Repair sales level was off in January
Service sales were roughly flat on a year-over-year basis as dealers indicated a lack of harsh winter weather through much of January failed to ignite weather-sensitive failures. The dealers who responded to the MTD survey indicated that service sales, which accounted for 29% of the study participants’ total revenues, were flat on a year-over-year basis in January (following a 3% increase in December). ■
Nick Mitchell is senior vice president, research, for Northcoast Research Holdings LLC based in Cleveland, Ohio. Mitchell covers a variety of subsectors of the automotive industry.
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