Healy: Keep an Eye on the Price of Gas

Our recent check-ins with tire dealers indicate that retail sellout trends were on the softer side during the month of February. While we have been waiting for Mother Nature to provide a boost to the industry from a demand perspective, we have not yet seen it. We note dealer feedback suggests unit levels have been roughly down low single digits year-over-year.

Specifically, tire dealers who responded to our survey highlighted average sellout declines of 1.7% in February 2026, which was moderately below the 1.1% decrease that was observed in January.

Looking more closely at volume for the month of February on a regional basis, the Southeast region was the lone region to see positive volumes, which were likely driven by consumer tire placement deferment. Other regions saw flat or negative volume trends, with the Northwest region seeing the weakest trends, down roughly 3.8% year-over-year. Sales trends that strengthened through the back half of 2025, highlighted by positive sellout last fall, have not carried over into the start of 2026.

We also note dealer feedback from a year ago suggested a tough retail environment. Given this, the comparison for today could be somewhat easier for dealers. That said, we would be remiss if we didn’t consider the recent conflict in Iran and how that may influence consumer behavior and driving patterns. In addition, dealer commentary suggests consumer demand for PLT replacement tires was down low-single digits year-over-year on a net basis compared to February 2025, with 56% of our independent dealer contacts seeing negative demand trends during February, flat from the 56% who observed declines in January.

Consumer deferment and trade-down have been consistent themes over the past several months and we believe that we may see this trend soften as consumers begin to think about spring weather.  

Subhead = Gas trends

Given volatile industry conditions driven by cost inflation and broader macroeconomic factors, we continue to monitor several data points to assess the health of automobile travel demand, which closely correlates with tire usage and wear. Gas prices have recently moved higher across the country, rising roughly 35 cents since March 5, with current levels now similar to what we saw during the spring of 2024.

As seasonal demand for gasoline begins to pick up around spring break travel, consumers are starting to feel the impact of higher prices at the pump. Crude oil prices also remain an important driver of fuel costs, with the price of a barrel of oil surpassing the $100 mark multiple times.

The recent move in fuel and energy prices could affect driver behavior as we move into spring. Gasoline demand data from the U.S. Energy Information Administration suggests miles driven have remained steady to start 2026. Weekly finished motor gasoline through the first week of March has stayed within its typical range and recently moved slightly higher pointing to stable driving activity early in 2026.

In sizing input/raw material cost movements, the basket of raw materials to make a basic replacement tire increased 2.0% on a year-over-year basis during February. We note this follows a 4.0% year-over-year average decrease during the last quarter of 2025. In analyzing specific input costs, natural rubber costs fell 0.4% year-over-year this past February as supplies increased. Oil prices fell an average of 8.0% year-over-year, but grew 7.0% month-over-month in February.

Data shows synthetic rubber costs were up 4.4% year-over-year, carbon black prices down 5.3% year-over-year and due to February tire fabric/cordage costs not being released, we are keeping this input constant from prior-month levels, suggesting costs would be up roughly 19.4% on a year-over-year basis.

While these raw material costs are down, it is important to note they are backward-looking. Recent conflict in the Middle East should noty be ignored as it relates to the tire industry. While all tires are not created with the same chemical and raw inputs, we note many of these inputs have a cost dynamic that is relatable to prices in the oil market, potentially around 70% of the cost to build a tire from a raw material basket standpoint.

Where are prices going? The outlook remains dynamic. Given this, we think it's prudent for all to keep a close on the commodity market and to think about what oil prices could mean as it relates to costs for tires as we move through the calendar year. While monitoring oil prices and input costs is a smart idea, we also think dealers should also be calibrating this into their expectations for miles driven/consumer related driving patterns, if gas prices remain elevated.

Subhead = Tier-three tops

Looking to the best and worst performers in our survey from a mix point of view, independent dealers report that tier-three brands are the most in-demand at the retail level. This marks the second out of the last three months where tier-three has been the most in-demand segment of the market.

Historically, our tier-two brands have been the most in-demand in our decade plus history of the monthly survey, while tier-one brands were the second most sought after tier this month, which was last seen in November 2025. Tier-three brands were the most sought-after tier from February to August 2025, a seven-month stretch of being the number one tier as consumers traded down a more value-oriented product.

We believe that the type of consumer in the market right now is looking for high-value tires at the lowest cost possible, as consumer budgets remain under pressure and broader macroeconomic pressures continue to weigh on sentiment.

Traditionally there is a high level of volatility in our survey, but we have largely seen tier three as a top performer in the current environment as of late. But we expect tier two to remain the top performer in the long term as consumers balance price and quality.