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Ludwig: 'Consumer tire demand to increase'

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"As expected, wholesale tire prices are going up as much as 8% in March as raw materials took a big jump up in January 2011,” says Saul Ludwig in the latest installment of the "Ludwig Report" in Modern Tire Dealer magazine.

“While natural rubber is the most visible as its climb is unprecedented in history, other materials including synthetic rubber, carbon black, steel and chemicals also up,” Ludwig notes.

“I estimate that the total raw material basket cost in January 2011 was at least 30% greater than January 2010 (and up 10% vs. just one month earlier), so manufacturers have no alternative but to move tire prices up.

“Yes, this is tough on consumers,” says Ludwig, “but there is no option for them except to trade down in quality. Your job is to explain to them that quality is the lowest cost in the long run. Fuel efficient tires can offer a partial offset to higher tire prices.

“Despite this tire price inflation, I still expect consumer tire demand to increase as much as 3% this year.”

Ludwig is a managing director with Northcoast Research Holdings LLC based in Cleveland, Ohio. He concentrates on the tire and chemical industries. Look for the full "Ludwig Report" in each issue of Modern Tire Dealer magazine

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