After two consecutive years of declining replacement consumer tire shipments, I expect a good rebound in 2003 beginning in the second quarter of the year. The 6.5 million free Firestone tires of 2000 will soon be ready for replacement. Overall, I see replacement demand increasing 2% to 3% in 2003, which should be followed by another good increase in 2004. With tire prices moving higher, dealers might want to beef-up inventories to capture the improving business I project.
Ludwig Report monthly survey
A number of independent tire dealers were surveyed concerning current business trends. Except for tire prices and costs, the results of the November 2002 survey are compared with those of November 2001.
Both passenger and truck tire dealers have weak outlooks
In November 2002, 46% of the passenger tire dealers and 44% of the truck tire dealers perceived their businesses would improve during the coming six months. Eight percent of the passenger tire dealers and 22% of the truck tire dealers expected business to worsen. The other 46% of passenger tire dealers and 34% of the truck tire dealers felt business would stay about the same.
Retail demand for passenger tires rose sharply in November
Retail sales of new replacement passenger tires surged 23.5% compared with the same month last year. Truck tire sales increased; volume was up 0.6% when compared with November 2001.
Truck tire retread sales increased in November
In November, retreaded truck tire sales increased 10.5% compared with November 2001.
Major brand tire prices rose in November
For dealers who are primarily retailers, the average cost and selling price for a 205/70R15 major brand tire were $56.58 and $87.57, respectively. For private brands, the figures were $33.10 and $50.47. The average selling prices for major brand tires were up 2% in November 2002 compared with October 2002 while costs remained flat. For private brand tires, selling prices remained level while costs decreased 2% compared to the previous month.
More dealers are seeing pricing as aggressive
In November 2002, 15% of the passenger tire dealers and 33% of the truck tire dealers felt manufacturers were aggressive in their pricing. Seventy percent of passenger tire dealers and 56% of the truck tire dealers described pricing as normal. Fifteen percent of the passenger tire dealers and 11% of the truck tire dealers described pricing as firm.
Passenger tire inventories OK, truck inventories are mixed
Some 69% of the passenger tire dealers and 45% of the truck tire dealers believed current inventories were in line with business. Twenty-three percent of the passenger tire dealers and 44% of the truck tire dealers felt current inventories were too high. Eight percent of the passenger tire dealers and 11% of the truck tire dealers described current inventories as too low.
Service demand increased slightly in November
During November, dealers reported that 45% of revenues were generated by service. On the average, service business increased 2% compared with results of the November 2001 survey.
About the author
Analyst Saul Ludwig is a managing director at McDonald Investments Inc. in Cleveland, Ohio, concentrating on the tire and chemical industries.
He has been writing for MTD since November 1975.
