Published on December 26, 2013

TB EDITORIAL: Shipment data call for caution

AKRON (Dec. 26, 2013) — The upbeat forecast from the Rubber Manufacturers Association (RMA) regarding replacement passenger tire shipments in 2013 is a sign that business may be finally starting to improve in the tire industry.

According to the RMA, which represents U.S. tire makers and a few key importers, replacement passenger tire shipments should end the year nearly 5 percent ahead — or 9 million units higher — than in 2012, while overall shipments, including all tire sizes and types, are expected to increase more than 4 percent or 12 million units over the same period.

The RMA cited declining unemployment. increases in vehicle miles driven, higher vehicle registrations, lower gas prices and an improving economy for the upswing.

After several down years, this positive sign is noteworthy. But not all appears rosy going forward.

For 2014, the RMA is predicting only a 1-percent growth in replacement car tire shipments and a 2-percent rise for LT tires. Replacement shipments of commercial truck tires, meanwhile, are expected to fall 2 percent in 2013 and then rebound by the same percentage in 2014.

Overall, including OE shipments, the RMA expects tire demand to rise nearly 2 percent in 2014 over 2013, buoyed by declining unemployment, a rebound in housing, increases in vehicle sales and miles traveled and other factors.

While any improvement is positive, there are a number of issues that cloud the forecast, which dealers and distributors should consider in their 2014 planning.

Much of the growth this year appears to have come from off-shore, non-RMA reporting companies. Import statistics bear this out, with imported passenger tire shipments climbing 15 percent through October, equating to 145 million units for the year. Of these, imports from China are up 68 percent to an annualized sum of about 46 million units.

As one distributor put it, "an entire tier of more affordable tires came in." So while unit volume may have grown, dollar volume has not kept pace and in some cases might have fallen.

2013 also was the year of the tire rebate, with most of the major companies offering some type of cash-back deal on sets of tires ranging from about $40 to as high as $160.

This had the effect of lowering tire prices, and thus margins, while training consumers to wait for the rebate when purchasing tires. That's similar to the scenario the new car industry went through several years back and what's taken place with clothing.

Another concern is whether this surge in rebate usage has pulled sales forward into 2013 that likely would have taken place in 2014.

Some tire dealers also have been loading up on inventory as a result of what one northern-based dealer called "crazy deals" being offered.

Rather than reducing inventory in preparation for the slower winter months following the holidays, this dealer's warehouse is overflowing with tires, all as a result of taking advantage of exceptionally low pricing.

Dealers should consider these issues as they prepare their business plans for 2014, and not just rely on what appears to be a strong upswing in the numbers.

This editorial appears in the Dec. 23 print edition of Tire Business.


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