"For sure, the retail consumer tire business was rather lackluster in 2011 as the combination of high gasoline prices (that led to a decline in miles driven), high unemployment and low consumer confidence led to tire buying deferral," says tire industry analyst Saul Ludwig in the latest installment of the "Ludwig Report" in Modern Tire Dealer magazine.
"But quite surprisingly, why didn’t those same pressures thwart sales of new cars which increased about 10% even as the earthquake and tsunami in Japan limited availability of cars and supplies?" he asks.
"The U.S. auto industry made great strides in exciting consumers with innovative products and low cost financing and most forecasters expect new car sales to increase again in 2012 — possibly by 6% or more. Contrary to one’s intuition, replacement tire sales are usually stronger in years when new car sales are strong (and conversely, are weaker when new car sales are down).
"For 2012, I am projecting that replacement consumer tire sales may increase 1% to 2%, but if the projection for new car sales turns out to be correct, I could be too conservative in my thinking."
Ludwig is a managing director with Northcoast Research Holdings LLC based in Cleveland, Ohio. He concentrates on the tire and chemical industries. Look for the full "Ludwig Report" in each issue of Modern Tire Dealer magazine.