Healy: Dealers Still Struggle With Sellout

We recently checked in with our tire dealer contacts and feedback suggests that May 2026 retail sell-through trends remained softer than many hoped for, indicating underlying demand conditions have yet to improve to the extent many had hoped. 

But dealers are optimistic, with the warm weather season upon us, and many feel customers should be coming in to replace those tires they have pushed off for some time now. 

Independent dealers who responded to our latest survey highlighted average sellout declines of 0.7% in May, which was marginally improved from the 1% decrease in the first quarter of the year.

In assessing dynamics, we note over the last 12 months, the average monthly sell-out levels are averaging 0.1% and have been down six of the last 12 months and 14 of the last 24 months.

Forty-three-percent of our independent dealer contacts reported negative demand trends during May, down from 33% seeing declines in April.

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

Consumers continue to trade down to tier-two and tier-three tires. Tier-three brands are now the most in-demand at the retail level. This marks the fifth month out of the last six months where tier-three was in the highest demand.  

Historically, tier-two brands have been the most in-demand in our decade plus history of the monthly survey. Consumers currently in the market appear increasingly focused on value-oriented tires at the most affordable price points, as household budgets remain pressured and broader macroeconomic uncertainty continues to weigh on consumer 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. 

Volume and raw materials 

Looking more closely at volume for the month of May on a regional basis, the Northwest region was the weakest region this past month, posting declines of high single digits, while the Midwest region saw declines of low single digits. Other regions saw flat or negative volume trends, with the Northeast and Southwest regions seeing the strongest trends, up roughly 4% year over year.  

The potential for stabilizing oil prices amid easing tensions in the Middle East could help support consumer demand during the summer driving season.  

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.

It is also worth pointing out the recent moves in gasoline prices over the past month, which may have an impact on miles driven. 

According to the American Automobile Association, gas prices in the first week of June declined by 18 cents when compared to the last week of May. This marked the second consecutive week of decreases in gas prices at the pump.  

Many parts of the country have begun to see gasoline prices come down from record highs seen a few months ago as a barrel of oil remains below the $100 threshold. It is important to note that families with summer plans will take any relief they can at the pump, possibly opting to move forward with a delayed tire replacement. 

While there is still some uncertainty in the Middle East, ongoing gasoline price declines is something to keep an eye on for the summer season. 

In assessing raw material prices based in early June, our base average-cost-to-build-a-tire index suggested inputs were up 24.1% during the month of May on a year-over-year basis. During the first quarter, the average cost to build a tire was up 2.7%, which compared to 4% decrease on average seen during the last quarter of 2025. 

In analyzing specific input costs, natural rubber costs increased on a year-over-year basis as supplies thinned and tensions continued in the Middle East. Oil prices increased an average of 60% on a year-over-year basis, but  declined 7% in May, driven by continued talks between the United States and Iran towards a cease to the war in the Middle East, helping to drive the price for a barrel oil down.

Recent data shows synthetic rubber costs were up 19% year-over-year, carbon black prices fell down 4% year-over-year and holding tire fabric/cordage costs constant, we assume an 8% year-over-year increase.

In holding current prices of raw materials constant, we estimate that the average cost to build a tire would increase 5% in the second quarter and will be up over the remainder of 2026.