Up, Up and Away! Pricing Trends by Tier and Region
The past 16 months have presented the tire and wheel industry with extraordinary challenges. With COVID-19 vaccines rolling out and states and economies reopening, the U.S. tire industry has seen a dramatic recovery.
However, we are hesitant to say that the industry is fully back to “normal.”
The pandemic presented us with an unprecedented economic situation and recovery has proven to be fluid, as well.
Fortunately, as we emerge from COVID-19, its economic damage seems to be far less permanent than the damage experienced during the national 2007- 2009 downturn.
Consumers are flush with extra money in the form of economic stimulus payments and an increasing number are getting back on the road.
However, pricing - not just in the tire industry, but in many other industries - remains in a state of flux.
It’s hard to find any consumer product that has not increased in price recently. Used car prices have increased 7% in just the past few months. Lumber prices have skyrocketed. Even items like cereal and diapers have seen price increases. Retail tire prices have not been immune to volatility.
Pass along or absorb?
Beginning in early 2020, many tire manufacturers publicly stated that they would be increasing prices and we noticed a gradual increase of retail prices over the course of 2020 and into 2021.
In recent months, more tire manufacturers have announced price increases - with some manufacturers enacting multiple price increases since the start of the year.
The reasons are many, including a combination of increased raw material costs, such as oil, as well as higher shipping expenses and other changing market conditions.
To add to the equation, the industry is also suffering from supply chain issues - most notably with a global shortage of shipping containers.
With many in the industry using a standard percentage mark-up based on brands and tiers - along with margins already being thin - we are seeing these cost increases being passed to consumers.
Thanks to stimulus checks and many people returning to work, however, consumers seem to be absorbing the cost increases very well.
To keep a pulse on the ongoing economic recovery, we wanted to look at the first half of 2021 in order to better understand the current state of the industry, specifically as it relates to retail tire prices. (The data presented in this article was culled from Jan. 1, 2021, through June 11, 2021.)
But first, here’s some background on who we are, what we do and how we are able to gather and crunch those numbers.
Fitment Group currently views and analyzes over four million retail tire prices on a weekly basis. This data is derived from a combination of brick-and-mortar retail shops, big box retailers and e-commerce/online retailers.
In this exclusive analysis, we looked at major brands, tier-four brands or opening price point brands, popular sizes and pricing trends as they relate to the major marketing regions in the country. (Fitment Group looked at tire pricing at the macro level, reviewing average prices for all brands and sizes across each U.S. census region.)
Biggest gains by tier
So what did we find? The quick response may be a bit obvious - tire prices have continued to increase over the course of 2021.
But this trend looks more consistent than the trend lines over the course of 2020, with the exception of the past few weeks, which have seen an increased spike in pricing.
Fitment Group analyzed 10 popular tire sizes and found that on average, opening price point or tier-four tires have seen the highest rate of price increase -11.1% - since the start of the year.
The prices of mid-tier tires have increased at a 6.7% rate and brand name, tier-one tire prices have increased at a more modest rate of 2.1%.
Choosing one size, 225/60R16, and looking across all tiers of tires and regions, we have observed that pricing for this specific size has increased by 3.9% since the first of the year. Prices of tires of this size have averaged $72.06 at the opening price point, tier-four category since the first of the year and at press time, averaged in this same category at $76.70, which represents a 6.4% increase.
In the tier-one category, tires in this size sold at $138.43 per tire, on average. That since increased to $144.18 at press time, which represents a 4.2% hike.
Average U.S. Advertised Tire Prices by Size and Tier
The wild west
Fitment Group also looks at tire pricing around the country by dividing the U.S. into nine granular census divisions and also rolling these markets up into four main regions.
When including all steps of tires, the Mountain census division has the highest average tire price We also found that the New England market has the lowest average tire prices, with an average price difference between the two regions of 9.7%.
The four main regions - ranked from the lowest to the highest average prices - are as follows, in descending order:
1. West Region
2. Midwest Region
3. South Region
4. Northeast Region
Pricing by U.S. Region (Size LT265/70R17)
The most price volatility observed during the first half of 2021 has been on the Pacific Coast. We did see volatility in the West and Midwest at the end of April due to a slight overall price decrease, plus a price increase in the Northeast and a consistent, steady trend line in the South. Like many of MTD’s readers, we look to the rest of 2021 with a great sense of optimism.
As the economy reopens, people will return to work and will be increasingly anxious to travel. Demand for tires will continue to rise. But so will tire prices, as manufacturers continue to hike their rates.
Stay in tune with what’s happening in your market so your dealership’s prices are consistent with what the market is currently bearing.
J.P. Brooks is the director of business of development at Fitment Group and has been working in the tire and automotive industry for more than 15 years, with an emphasis on business intelligence, data and digital applications. Fitment Group focuses on delivering data and business intelligence solutions that drive sales and growth for tire retailers, distributors and manufacturers. For more information, visit www.fitmentgroup.com.