"We want to grow further with you," John Hagan, executive vice president of sales for Nexen Tire America Inc., told Nexen customers during the company's annual dealer meeting, which is taking place this week in Banff, Alberta.
Hagan and Brian Han, Nexen Tire America's CEO, provide an update on Nexen's supply to dealers, the company's original equipment (OE) fitment strategy, the Nexen Next Level program, significant additions made to its distribution network and more in this interview.
MTD: How would you describe the state of Nexen’s supply in North America? What we’re hearing from dealers is that six to eight months ago, supply was really tight. And now they’re telling us the pendulum has swung the other way…
Hagan: It’s not just Nexen-only. If you go back to the beginning of the year, there was a lack of ships and a lack of containers. We communicated as much as possible with our customers (during this time) and then two or three months ago, the floodgates opened up and every dealer had reams of tires coming in, all at once. And of course with inflation… sellout has been really soft over the last three months. Dealers are very cautious on what they buy and when they buy. But with Nexen, it's never about about the production side of it. It’s been an issue (with) the transportation side of it.
Nexen is used to having 95% fill rates. We were doing very well heading into 2020... (but) because of the issues with shipping, our fill rates dropped. Now we’re roughly at about 70%. The good news is we do have (plans) to get back up to 90%. We’re used to being in the 90% (arena). We’re trying to get back to where we were (pre-pandemic.)
MTD: You mentioned that you’re enhancing production at your plant in the Czech Republic to maybe take some pressure off Nexen's plant in South Korea, which will enable it to build more product for North America. (Editor's note: Nexen products sold in North America are manufactured at the company's plant in South Korea.)
Hagan: That was the benefit of the Czech plant at the beginning. Before Czech, (supply) was coming out of China and Korea, for the most part. So when Czech opened up, it freed more capacity for Korea to help the U.S. grow. And we got a lot of benefit from that. Plus OE fitments have helped.
MTD: Are all of your plants operating at full capacity?
Han: Most of them are at full capacity.
MTD: Any plans to add capacity at the South Korea plant?
Han: No. We’re now running at full capacity (in Korea) so we do not have plans to expand capacity. We’re improving machinery and production systems, so I think that will (result in) enhancement of production.
MTD: What impact have tariffs had on your ability to get product to the right place at the right time in the U.S.?
Hagan: From the sales standpoint, not too much. It didn’t really have an impact. We maintained our supply chain. We maintained our pricing. We'd go up on price a little, but not the full magnitude. If you look at the price flow at that point in time, we were fortunate because the whole market was changing prices. That was tariff-related partly. But others were seizing opportunity (due to increases in) other costs.
MTD: How was your business overall last year and through the first nine months of this year? Are you back up to pre-pandemic levels?
Hagan: Last year was very good for us. We’re definitely back to pre-pandemic (levels.) We’re coming off the bell curve where we (now) have enough tires coming in to support our business.
MTD: Nexen continues to earn key OE fitments, with the Kia Niro and Kia Niro EV fitments being the company's latest ones. Are your OE fitments generating good pull-through sales for dealers?
Hagan: Very much so.
MTD: What’s Nexen’s OE strategy and who are you targeting? It seems like your fitments have been very selective.
Hagan: They are targeted and selective in order to support where we’re trying to go in the U.S. market. We’re not going after the smaller fitments. We’re going for the premium fitments – 18, 19 and 20 inches. And then we’re (expanding) on the electric vehicle (EV) side, from an OE standpoint.
MTD: Why EVs? What opportunities exist there for Nexen?
Hagan: A lot of the OE (vehicle) manufacturers – Ford, General Motors, Stellantis - have all made statements that they’re increasing their EV market share. We’re following closely and are being selective on the fitments we have. I would say we got into the ground floor a couple of years ago with (EV start-up) Canoo on the West Coast - when they were just starting up - and a couple of others we talked with to.
MTD: Some tiremakers are producing tires that have been specifically designed for EVs and others are saying you can take an existing product, put that on an EV and not see any issues with performance. What’s your philosophy?
Hagan: There’s been a big debate (about that) over the years, which I find very interesting, What I like about Nexen’s strategy is we’re using current tread patterns and names, but are changing the specs at the size level to meet the OE manufacturers' performance requirements. Some manufacturers are creating a whole different tread pattern and whole different names, which in our opinion, creates complexity on the dealer side.
MTD: How important has the Roadian light truck tire line been to Nexen’s growth?
Hagan: Very important, if you look at where the market is going. We’ve put (out) two great products – the Roadian HTX2 and the Roadian ATX, with a more aggressive design. Everything has been positive.
MTD: The Nexen Next Level associate dealer program has grown to include 4,000 dealers who are using is features. What is driving that growth?
Hagan: I would like to say we’ve created something great – which I think we did – but it’s really the turnaround time after we get done with the quarter on getting money to that Next Level dealer. If a quarter closes, 15 days later, we’re cutting checks. Plus we still have a robust program. The other increases are due to our improved distribution. We’ve increased our distribution over the last two years, with pick-ups like U.S. Auto Force, the Tire Alliance Groupe and more retail, like Monro. Overall, over the last two to three years our distribution footprint has really grown. But we’re also taking care of our current distribution.
MTD: Do you sell through American Tire Distributors Inc.?
Hagan: Yes. Right now, we’re (also) with the TBC group. So when you talk nationwide chains, we’re covered.
MTD: When you go into a U.S. AutoForce, for example, and pitch them on Nexen, what’s the selling proposition?
Hagan: Warranties, value – we don’t play the pricing game. We’re not the deal of the day. We want to make sure our dealers have profitability and it’s sustainable. Our message has been pretty steady over the years. And we don’t see changing that strategy because quite frankly, it works.
MTD: Associate dealer programs have really exploded in growth in recent years…
Hagan: I think you have no choice but to have one because it helps the distributor sell out your tires. It’s a good push. And the distributor buys in more if they know they have the manufacturer behind them.
MTD: Can you preview any new products coming down the road next year?
Han: We’re developing all-weather tires for (the) passenger and SUV category.
MTD: What are Nexen’s biggest growth opportunities in North America?
Hagan: We’ve done a very good job of maintaining our distribution channel and our real focus going into 2023 is to make sure we are giving all of our customers what they need – not what (we) need only. We need to make sure we are reacting very quickly to our customers’ needs, which the industry does not do a good job of, in my opinion. We need to improve on that and improve our share of account with our customers.