Updating customer price lists to reflect the latest cost increases imposed by tire manufacturers isn't an appealing prospect to most independent dealers-particularly those carrying multiple brands. Nevertheless, dealers would be wise to hike prices rather than absorb the manufacturers' latest round of price increases, which range from 3 to 5.5 percent.
The $1.50 increase this represents in the price of the typical passenger tire isn't likely to cost the dealer a sale in most cases.
However, his failure to pass along these increases well could mean the difference between profit and loss for a dealership's retail sales operation at year's end.
Tire makers blame the increases on rising raw material costs, which have doubled over the past 12 months.
Ironically, all this is the result of booming tire sales, which have brought increased demand for natural and synthetic rubber, as well as other tire materials.
Tire makers point out that the cost of natural rubber has spiraled to its highest level in 40 years. Meanwhile, three of North America's five largest producers of synthetic Styrene Butadiene Rubber (SBR) already have announced their third price hike in 1995. And four producers boosted SBR prices six times during 1994.
Meanwhile, manufacturers say the current round of tire price hikes won't cover all of their increased material costs. Therefore, additional increases in the prices of tires appear highly likely in the months to come.
Tire company officials say they're anticipating at least three tire price hikes during 1995. And most are strongly encouraging dealers to pass along these increases to tire users. Neither the manufacturer nor the dealer is in a position to eat these additional costs, they point out.
Fortunately, with the demand for tires running high, there would seem to be little competitive advantage in holding the line on retail prices in the face of rising wholesale costs. As a result, the latest increase in tire prices may actually stick.
For the moment at least, the sun is shining on North America's replacement tire market. Dealers should, as the saying goes, make hay while the sun shines.