Tariffs and Time Are Helping Dealers Compete Against Low-Cost Import Tires
The crisis for retreaders created by high volumes of low-cost tires from China seems to be easing. Respondents to Modern Tire Dealer’s annual survey of the nation’s largest commercial tire dealers expect tariffs on medium truck tires, which have gained preliminary approvals from the federal government, to provide some relief.
Parkhouse Tire Inc. has had about a 5% growth in retreading business in the last year. “It could be better if the Chinese thing was resolved,” says CEO Jim Parkhouse. “Once the tariffs are established, the pricing will level off and it should help increase our retread business.” Based in Bell Gardens, Calif., Parkhouse Tire holds the No. 11 spot in MTD’s top 25 commercial tire dealer rankings.
Steve Theissen, an owner of T&W Tire Inc., which holds the No. 20 spot, also feels tariffs will improve the operating environment. “The tariffs help us increase our retreading business. It’s going to make retreads much more cost effective,” he says. T&W Tire is based in Oklahoma City, Okla.
Anti-dumping tariffs on truck and bus tires received preliminary approval in August, and countervailing tariffs were preliminarily approved in June. The U.S. Department of Commerce is expected to issue its final ruling on Chinese truck and bus tires on Jan. 17, 2017.
Earl Colvard, president of Earl W. Colvard Inc., which does business as Boulevard Tire Center, feels tariffs are a short-term fix. “Tariffs are a temporary solution. It really should be a value proposition: price versus performance.” Deland, Fla.-based Boulevard Tire Center holds the No. 9 spot.
Quality begins to trump price
Now that fleets have put some miles on their low-cost import tires, Sumerel Tire Service Inc. is seeing customers choose better quality tires, according to Bob Majewski, chief technical officer.
“Customers think it’s a new tire, so it’s good. Then we have to show them their mileage and tell them they’re actually buying two to one so how good is it at that cheap price? And the casing isn’t worth anything when they’re done with it. They’ve got to look at all that,” says Majewski.
“Some of the smarter users are figuring it out. They say that tire didn’t last four months, that tire didn’t last six months. Your retread lasted a year. But they don’t believe you in the beginning.”
Jason Lightbody says his core customers did not buy low-cost Chinese tires. Lightbody is manager of the tire and oil division at Houska Automotive Inc., a single store offering retail and commercial services in Fort Collins, Colo.
But Lightbody says his customers who chose low-cost imports did not realize the savings they expected.
“We had some customers that put on some lower cost Chinese import tires, and they didn’t perform very well,” he says. “We’re talking flat repairs, irregularities in the tires, problems capping them. They found out pretty quickly that the initial $150 or $200 savings in the tire is causing them some problems on the backside. Obviously, we’re not going to give them near the same kind of price for their casings. Over time, they weren’t providing the cost per mile.”Low-cost imports hurt margins
The lowest tier Chinese truck tires have taken some share from Tier 3 Chinese and domestic manufacturers, according to Brad Raben, vice president of commercial sales at Raben Tire Co. LLC, which holds the No. 17 spot.
“These products have a higher margin rate, but in the end cost us margin dollars. It has had some effect on retread margins but in most cases where they’ve competed, the customers perceive the new tire to be better. In many cases we couldn’t get low enough with a retread and casing to offer savings.”
Tom Bowman, vice president of Belle Tire Distributors Inc.’s commercial division, reports low-cost Chinese imports had no impact on Tier 1 margins while margins were reduced 7% to 10% on Tier 2 tires and 5% to 7% on Tier 3 products.
Top tier tire makers react
Top tier tire manufacturers responded to the low-cost Chinese imports with new offerings. “Goodyear with its Kelly line and Michelin with its Uniroyal line are getting really aggressive trying to go after that Chinese market. I think that’s fantastic. That’s giving us another tool in our box,” says Lightbody.
‘Flat is good’
Majewski has operations in Lebanon, Tenn.; Newport, Ky.; and Bluffton, Ohio. “I have plants in three markets. The coal industry has been crushed this side of Ohio, West Virginia and up into the panhandle area of Pennsylvania,” he says. Business is down 20% at his Bluffton retread shop and commercial outlet, which serves southern Ohio and West Virginia’s coal industry.
The story is different at Majewski’s Lebanon store and retread shop. New construction and road building in the South, especially in the Nashville area, are helping push volumes up 25% at the Lebanon operation.
Volumes at the Newport facility are steady. “We’re established but we’re feeling the pinch from the cheap Chinese tires. Our new tire sales are up considerably from last year, and our retread sales are flat. You can buy a premium tire for $60, $80, $100 less than you could a year ago. A lot of people try them.”
Overall, his business is flat for the year. “Flat is good because a lot of people are down 20% and 30%,” says Majewski.
Majewski is finding new ways to stay relevant to his customers. He is adding a retread for 12-16.5 skid steer tires and retreads for wide base tires in sizes 455/55, 445/50, and 445/65 at the Newport plant by the end of 2016.
Dealers of all sizes add stores
Belle Tire Distributors is restructuring its business to enable customers to single-source their commercial tire vendors over a larger geographical footprint. In August, the company announced plans to merge its commercial division with Tredroc Tire Services Inc. and Belleroc Tire Services, a joint venture formed in 2010 by Belle Tire and Tredroc.
The merged company will operate under the Tredroc Tire Services name and will be jointly owned by Belle Tire and Tredroc. The merger is expected to be complete by the end of 2016. The new Tredroc Tire Services will have 25 store locations and six retread shops in Illinois, Indiana, Kentucky, Michigan, Ohio and Wisconsin. Tredroc is tied for No. 13 in MTD’s top 25 commercial dealer rankings.McCarthy Tire Service Co. has been expanding and relocating stores since acquiring 10 Ragan Tire Group LLC locations in June 2015. Five commercial stores have been moved to larger facilities and commercial tire and truck repair have been expanded at eight stores. A new Bandag retread plant with a capacity of 1,000 retreads per day opened in Wilkes-Barre, Pa., in September. The company also opened a retread plant with a capacity of 198 retreads a day in Wilson, N.C., last winter. McCarthy Tire holds the No. 6 spot with 25 commercial stores, 14 combination stores, and eight retread shops.
Over the last year, Raben Tire opened outlets in Otterbein, Ind.; Paducah, Ky.; and Clarksville, Tenn., as well as a satellite of its Central City, Ky., store in Greenville, Ky. The company also expanded commercial repair and alignment services and now offers them at 14 locations.
The No. 1-ranked dealer, Southern Tire Mart LLC, has opened five to seven stores per year for the last few years and plans to continue that pace in the coming years, according to Cliff Brown, communications director. The company is opening its newest stores in Mossey Head, Fla., in the fourth quarter of 2016 and in Forest Park, Ga., in the first quarter of 2017. The Mossey Head store is new construction located in Florida’s Interstate 10 corridor. For its Forest Park location, Southern Tire Mart is retrofitting a former big box store into a commercial truck center.
About the same time Southern Tire Mart opens its 75th commercial store in Forest Park, Houska Automotive is opening its first stand-alone commercial truck center and retread shop.
Houska Automotive was founded in 1952 as a three-bay automotive service center. The company added retail and commercial tire sales and service five years ago. Retreads were offered through a third party. Today the company has 45 employees working in two side-by-side buildings totaling 30 bays. About 750 tires are distributed annually through a wholesale service begun two years ago. In addition to selling and servicing medium truck, off-the-road and farm tires, Houska Automotive offers light truck and medium truck mechanical services from preventive maintenance to engine overhauls. The company has four service trucks and a mobile repair truck.
The commercial business has been growing 15% a year. The company bought property next to its store for a seven-bay truck center housing a retread shop. Construction will be complete by the end of January 2017. At first Houska Automotive will retread 25 medium truck tires a day using Oliver Rubber Co. LLC’s retread process. The goal is 50 a day, or a thousand retreads a month. The company is starting with medium truck tire retreads and hopes to add OTR retreads, section repairs, foam filling and tire pressing.
Local mom-and-pop shops in Fort Collins offer diesel repairs but not passenger and light truck repair or tires. The dealership’s other competitors are Tire Centers LLC (TCi) and Bridgestone’s GCR Tires & Service stores.
“We’re the only family-owned commercial tire center. As far as independent tire retailers, we’re the largest in northern Colorado,” says Lightbody.
No. 3-ranked Les Schwab Tire Centers Inc. stores are now entering the Fort Collins market. “We’re excited to have them here because they’re another tire business that’s at the top of their game,” says Lightbody. “We don’t give our business away. We think there’s a real value to it. Our success from 1952 proves that.”
See the Top 25 Commercial Tire Dealers for 2016 here.