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Industry Analyst Says Demand Is Strong in March

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Demand for replacement tires was “fairly solid” in March, according to Nick Mitchell, senior vice president and research analyst at Northcoast Research Holdings LLC. He bases his assessment on the results from the monthly Northcoast Research Tire Demand Index.

“Our research suggests that channel inventory is starting to build modestly, as sell-out trends have slightly lagged sell-in trends since late 4Q ’15,” he says. “At first this issue was contained to the winter/snow tire category; however, some dealers are now saying they are a little over-inventoried on some all-season product, especially across the Midwest and Northeast regions of the country.”

Despite this dynamic, Mitchell says pricing and promotional trends remain fairly benign. Beware, however: If the supply/demand imbalance continues throughout the second quarter, “the risk that pricing fundamentals could start deteriorating clearly rises.”

Mitchell says the Tier III category in March not only finished better than last place for the second time in the last three months, but also took the top spot in the latest survey. “Some dealers indicated that improved supply relative to the prior year’s period and the mild winter are driving the relative outperformance. That said, we continue to hear that intermediate-term sell-through trends of premium tires at retail remain very solid on an absolute basis in the United States.”

He concludes that "intermediate-term sell-out trends" remain healthy.

“Overall, we remain encouraged by the fact that the index has been flat or in expansionary territory for 28 of the past 30 months, which is consistent with our thesis that the U.S. market is in the midst of a volume recovery cycle.”

For a look at results from last month's index, check out this link:

"Mitchell: Tier 1 Tires Are Leading the Way."

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