RMA: Overall tire shipments in 2006 will decrease nearly 3%

Aug. 5, 2006

Tire shipments for 2006 are expected to decrease by 2.8% compared to 2005, according to the Rubber Manufacturers Association (RMA). This outlook is a drastic change from March, when the RMA said it expected tire shipments to grow by more than 1% this year.

The decrease reflects the overall slowdown in the United States economy. "While GDP growth was a healthy 5.6% in the first quarter, second-quarter growth slowed substantially to 2.5%," said the RMA. "Slower growth and higher energy costs appear to be forcing consumers to prioritize spending including postponing tire replacement."

However, the RMA's Tire Market Analysis Committee projects growth to resume in 2007. Total tire shipments are expected to increase by nearly 7 million units to 319 million units, growth of approximately 2.3%.

The committee believes that the number of vehicles and miles driven annually will increase once fuel prices stabilize, which is predicted.

Overall, the combined original equipment and replacement shipments for the 2006 automotive and truck categories are anticipated to decrease by 8.9 million units to nearly 312 million units, compared to 320.8 million total shipments in 2005.

The committee's forecasts for key categories and their respective segments for 2006 through 2011 include the following:

Original equipment passenger tires. This market is projected to decrease by more than 2% to approximately 51 million units in 2006 as a result of a decrease in domestic light vehicle sales and subsequent decreases in domestic light vehicle production. No growth is expected in 2007, with total shipments remaining at the 51 million unit level.

Original equipment light truck tires. Approximately 5.6 million units are projected to be shipped in 2006. However, a 5.6%, or 300,000-unit, increase in 2007 is forecast because "demand for small commercial trucks will remain strong."

(There has been a change in reporting this category and its related replacement category. Beginning this year, service trailer tires are no longer included in them; as such, figures for previous years are not comparable.)

Original equipment medium/wide-base/heavy on-highway commercial truck tires. Sales of commercial truck vehicles will experience modest growth in 2006 due to continued vehicle replacement demand and response to future changes in EPA emission regulations. As a result, 6.6 million OE units are forecasted to be shipped in 2006, an increase of 5.7%.

A sharp decline of approximately 16% is anticipated in 2007. Unit shipments will drop to 5.5 million as some pulled-ahead truck sales that would have been realized in 2007 are being shifted to 2006.

(There has been a change in reporting this category and its related replacement category. Beginning this year, "heavy on-highway truck tires" are now included to obtain a more accurate portrayal of the commercial tire market.)

Replacement passenger tires. Overall, the passenger replacement market will decrease by approximately 2.3% to nearly 198 million units for 2006. That represents a decline of 4.6 million units over 2005 shipments.

Individually, the P-metric SUV and ultra-high performance tire markets are projected to increase more than 5% and 12%, respectively, compared to 2005.

The overall market is forecast to rebound in 2007 by approximately 7 million units to 205 million units "as consumers will need to eventually replace tires." Overall growth in the replacement market is primarily a result of the number of vehicles on the road and vehicle miles traveled.

Replacement light truck tires. This market segment is projected to decrease by approximately 7.6% to 33.3 million units in 2006 due to the increasing popularity and numbers of cross-over vehicles and smaller SUVs that use P-metric passenger tires rather than light truck tires.

Replacement medium/wide-base/heavy on-highway commercial truck tires. This market is projected to decrease by approximately 2% to 17.2 million units in 2006 vs. 2005. However, an increase of approximately 400,000 units is forecasted in 2007.

The RMA's Tire Market Analysis Committee is comprised of tire market analyst professionals representing the major U.S. tire manufacturers, which account for more than 90% of all domestic tire shipments. Their analyses and forecasts of current and future industry activity include a review of RMA tire industry and economic data, government trade figures, and vehicle sales and production.