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Analyst Says the Price is Right When It Comes to Tires

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The average price of a light vehicle tire decreased 0.1% in July compared to June. Light vehicle pricing also decreased 0.5% in June compared to May.

According to Nick Mitchell, senior vice president of research for Northcoast Research Holdings LLC, the overall pricing environment in North America is rational and in-line with his expectations.

“Our contacts suggest that any price adjustments seen at retail over the past few months reflect a portion of the volatility in raw materials, as well as some targeted price repositioning by manufacturers on select products,” he says.

Here is a further breakdown of pricing based on the Northcoast Research Tire Pricing Index, a proprietary survey comprised of retail prices on more than 10,000 consumer replacement tire SKUs.

Average pricing from June to July

* light vehicle tires: down 0.1% to $125.51.

* most popular passenger tires: down 0.1% to $121.02.

* most popular light truck tires: down 0.3% to $155.56.

* value tires: down 0.4% to $112.92.

* mid-tier tires: flat, from $116.27 to $116.30.

* premium tires: flat, from $138.66 to $138.60.

On a year-over-year basis, the average price of a light vehicle tire decreased 0.4% in July. This performance included a decline of 0.2% in the average price of the most popular passenger tires and a 1.3% decrease in pricing trends across the most popular light truck tires.

“From a 'tiering' perspective, value tires at retail have fallen 1.8% over the past year, which compares to prices that were down 0.8% on mid-tier SKUs and an increase of 0.6% on premium brands,” says Mitchell.

“We expect pricing will remain fairly firm going forward as Tier I and Tier II producers remain disciplined in managing the price/volume trade-off to maximize EBIT (earnings before interest and taxes). As such, we think that the manufacturers will dial back some volume incentives as they adjust pricing to reflect the recent run in raw material prices off of their lows.”

For a look at pricing results from June, visit "Tire Makers Will Be Less Likely to Offer Volume Incentives."

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