Getting price increases to stick is a sticky wicket for manufacturers and dealers

Bob Ulrich
Posted on March 27, 2011

It seems like consumer tire price increases are being announced every other day. There have been 14 such announcements since the beginning of the year.

Two of the 12 tire makers, Michelin North America Inc. and Nexen Tire America Inc., will have raised prices twice by May 1. I'm sure there will be more to come.

The average increase is "up to" 8%.

But will the price increases stick? That's a question Barry Steinberg, owner of Direct Tire & Auto Service, a four-store dealership based in Watertown, Mass., also asks himself.

Steinberg was named Modern Tire Dealer's first Tire Dealer of the Year, way back in 1993. (Does it seem like that long ago, Barry?)

"It will be interesting to see how many of these upcoming price increases stick," he commented to me in a recent e-mail. "There is a tremendous anount of push back by the public, especially if they have purchased tires in the past year."

And that's just the consumer pushing back. What about the tire dealer?

I am reminded of a conversation I had with a tire manufacturing executive last year about tire prices. His company had raised prices three times.

He said the average actual price increase that was implemented was less than 6%. Why? Because his dealers balked.

If all the price increases from last year had been implemented, the average costs of a replacement passenger tire and light truck tire would have increased much more than they actually did. Here are the facts, courtesy of our 2011 and 2010 Facts Issues:

Year    Passenger  Light truck

2010:  $109.71       $155.79 

2009:  $  97.82        $138.46

The average percent increase in 2010 was 12.1% and 12.5%, respectively.

The price of natural rubber increased more than 60% last year. It is up 9% this year.

Tire company's need to recoup their expenses, and in a perfect world, they raise prices, tire dealers raise their prices accordingly, and consumers pay the prices.

When the year is over, it will be interesting, as Steinberg says, to see if the announced price increases stuck. And who is really paying the price.

Related Topics: Barry Steinberg, Direct Tire & Auto Service, Facts Issue, Price increase, raw material costs

Bob Ulrich Editor
Comments ( 1 )
  • Michael

     | about 9 years ago

    You mentioned that there have been 14 price announcements already this year. Does MTD keep an archive of these announcements/releases on the website? Thanks

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