Reports from tire dealers suggests that retail sellout trends for May were again negative, marking the fourth consecutive month of declines. Dealers saw average sellout declines of 1.4% in May, following a 0.9% drop in April.
Regionally, tire dealers in the southeast reported the strongest trends, while dealers in the Midwest, Southwest and Northwest all saw declines. We believe this is an extension of the ongoing uncertainty related to tariffs, along with the continued environment where consumers are deferring unnecessary maintenance and tire replacement.
A price increase update
A majority of tire dealers indicate tire prices increased in the month of May — 56.2% of dealers — which matches the commentary we heard from Goodyear Tire & Rubber Co. executives and others in recent months.
Commentary from our checks suggests that tariffs are the main cause of these increases. And dealers indicate the tariffs are further accelerating consumer trade downs to more affordable, lower tiered tires.
Miles driven trends were also flat in May, compared to a slightly negative April. And it looks like early June has gotten off to a weak start, with the first week of the month down 2% against a soft comparable in June 2024, when the trend was down 1.2%.
As for raw materials, the combined cost of the raw materials needed to build a basic replacement tire fell 4.6% in May, an increase of 0.3% from April. If prices were to hold steady, we’d expect to see a 4.6% year-over-year decrease for raw material costs in the second quarter. In the first quarter, those costs dropped 1.6% year-over-year.
Natural rubber costs dropped 7.6% in May, compared to year-ago prices. Those prices are dropping as supply normalizes and laps elevated comparisons. Oil prices decreased 21.8% year-over-year in May. Synthetic rubber and carbon black costs were both down, 4.7% and 3.6% respectively, while tire fabric/cordage costs increased 6.5% compared to year-ago prices.
We continue to think 2025 will be a year of ongoing moderating price movements, including some declines, as the index laps year-over-year increases. We see it as a potentially welcome shift toward stability.
A dip in traffic
Tire dealers indicate consumer demand for passenger and light truck replacement tires was down — by low single digits — again in May compared to the same month a year ago. About half of dealers — 56% — reported negative demand trends for the month — more than double the 20% of dealers who reported declines in April.
Dealers say traffic into stores is slowing amid the larger economic environment, which includes concerns about tariffs and now, price increases from original equipment manufacturers.
We believe dealers are still managing the continued wave of consumer deferment, along with trade downs in the face of increasing tire prices. Of the tire shoppers who were in the market, they largely continue to pick low-end options rather than tier-one or tier-two options.
Mix in the market
In May tier-three tires were again the most in demand at the retail level. This marks the 12th month out of the last 13 where tier three has been atop the demand chart in the industry. As you know, tier two usually is our long-running leader, but in May tier-two tires came in second place, while tier-one products placed last in our rankings.
We believe the type of consumer in the market right now is shopping for high-value tires at the lowest possible price. Consumers’ wallets are stretched thin and tariffs continue to weigh heavily into their considerations when shopping for tires.
The typical volatility in these rankings has been outdone by these lingering market conditions, so tier-three tires continue to sell well. We’d expect this scenario to continue in the intermediate term, but we still expect tier-two tires to remain the overall top performer in our long-term trends.
