Continental Execs Discuss Market Conditions, EV Tires and More
'In the Past Couple of Years, Dealers Have Been Looking for Stable Partners'
In this sit-down interview from Continental Tire the Americas LLC's Gold Dealer meeting, Continental executives Bill Caldwell, senior vice president, U.S. PLT sales and marketing; Chris Charity, vice president of sales, U.S. PLT replacement business; and Travis Roffler, director of marketing, discuss a wide variety of topics, including the state of the market, tires for electric vehicles and more.
MTD: What are current market conditions like?
Caldwell: The industry is still navigating its way out of the last couple of years of supply and demand issues. For the dealer channel specifically, there is still a mismatch of supply and demand. I don’t think it applies to any one manufacturer. I think we’re all in the same situation right now.
Specific to Continental, things are stabilizing somewhat. Over the course of the summer, we’re looking for … more driving, but all of the barometers say we shouldn’t be surprised if things slow down a little bit due to gas prices, interest rates and family budgets that are stressed. It would not necessarily be a disaster if things slow down a little bit to give everyone some breathing room.
MTD: The U.S. Tire Manufacturers Association just increased its prediction for unit shipments. Based on what you are saying, does that mean the first half was stronger than the second will be?
Caldwell: There are a couple of numbers - sellout and sell-in. What we’ve seen is there have been a lot of imports that had headwinds getting into the country, particularly (from) Asia. That is loosening up right now, so if you want to look at comps, it’s an over compensation, low-comp to high-comp. I’m not sure where it will end, but I think that (the) freeing up at the ports (is) driving a lot of the numbers right now, from the USTMA standpoint.
For most of us USTMA members who have an OE exposure, we are having to rebound and push capacity back to the OE requirements as vehicle build starts to come back - whereas it was really weak last year. It’s hard to take the USTMA numbers and say that’s a trendline, especially after the last two years and the dynamics that have gone on from a supply standpoint.
At Continental, we are still flexing into our European supply base as that area is recovering differently than ours and a little bit down from here. We’ve been moving tires from U.S. plants to European plants for both of our brands.
MTD: You mentioned during the presentation today that you’ve had a rather lengthy sponsorship with Major League Soccer (MLS). Are you in negotiations to continue them or looking to move on?
Roffler: I said at the time the contract ends, it would be a 15-year-long relationship, which is a long time, but we are not indicating it may end. We are waiting to do a new contract when the time comes.
The key in sponsorships is to find sponsorships that meet the needs of the local market, whether they are sales needs, the branding needs, our exposure needs or our dealer needs. That is what we are looking for, whether it is for the Continental or General brand. MLS continues to be the largest and best CPM for us. It is fantastic for us.
We are always looking at new sponsorships and we decide whether they make the most sense for us. The world continues to change.
MTD: What are the main conversations that dealers are having with you right now?
Charity: It’s different than in the past. We now talk about partnerships. In the past couple of years, dealers have been looking for stable partners. They are having deeper conversations on both sides of the table.
Dealers are always looking for pricing, but we make sure we have a great value proposition. We don’t have our own captive retail locations, so we must give retailers the things they need to sell tires. We want to bring strong products, training, and bring in other companies to work with the dealers and put other pieces to the table. The Universal Technical Institute relationship is a great example of that. Getting more people and technicians led to this partnership. It is a strong win-win for all of us.
MTD: What percentage of your dealers handle both of your brands?
Caldwell: I don’t know if we have any Gold Dealers who only buy just one of our brands.
MTD: What percentage of your volume goes through Continental Gold dealers?
Caldwell: I don’t think we want to share that. Strategically, we see other companies pulling away from the smaller independent tire dealers as overall they are diminishing in volume. But we see this as an opportunity as it's still the majority of the market.
MTD: What Gold programs do dealers take the most advantage of?
Roffler: I’d say our RPM program, first - then our Engage 360 training program, as well as the credit card program.
MTD: Has there been a demand yet by dealers for tires that are specifically designed for EVs?
Roffler: To Chris’ point, dealers want answers to their questions. From us, every Continental tire we build is perfectly suited for EVs. When it comes to Teslas, 100%. It is optimized for optimized range. Seven of 10 EV manufacturers have chosen us for their fitments. (Editor’s note: A Continental press release on August 9 said the company supplies tires to 300 different EV models.)
What we are telling our dealers is that there is a range focus and a performance focus. We are developing a mission statement for our dealers regarding this, so that they have the answer and explanation that they deserve. The answer is what I said before - every Continental tire is perfectly suited for an EV.
Caldwell: I think there are some companies that would like to create a segment, but technically, we don’t believe anything positive will come about by designing a tire for a different powertrain. We will produce tires with the necessary trade-offs for range and/or performance, but it is not powertrain specific.
With the price of fuel today, low rolling resistance may be desired by some consumers with internal combustion engines. For the dealers, it is a matter of vetting the customer. But I don’t think we need to brand our tires as “EV-only” because those options are valid, regardless of the powertrain being used.
MTD: So what is the main message you want your Gold Dealers to hear?
Charity: It is a consistent message. We will continue to bring strong products to the market and refresh our products and invest in people to give them strong support. We spend a lot of time internally finding the right mousetrap for our customers. It's all about partnerships - not only with our customers, but also (with) our business partners to design programs that work for our dealers.
Click here to read MTD's Continental Gold Dealer meeting report.