Auto dealerships pose a threat to the independent tire dealer, both in Canada and the U.S. Tire dealers should do everything they can to keep themselves price competitive.
Make no mistake. If automobile dealerships can turn a profit selling tires they'll do it.
U.S. tire dealers wondering what role auto makers and their dealerships might play can look to Canada for a glimpse at what their own future marketplace could look like.
There, North America's Big Three auto makers—General Motors Corp., Ford Motor Co. and DaimlerChrysler A.G.—have been pushing tires through their dealerships more aggressively and for much longer than in the U.S.
And the numbers are growing. Most of GM's 800 dealerships in Canada now sell tires. Unit sales rose 32 percent in 1999 on top of 14-percent growth the year before.
More than 300 of Ford's 568 dealerships also sell tires, offering the Goodyear, Michelin and Uniroyal brands as well as Bridgestone's Blizzak winter line.
DaimlerChrysler, whose tire program dates back three decades, even sells its own Autopar brand, made by Michelin, at all of its 555 dealerships in Canada.
Canadian tire dealers believe the three auto makers have been stepping up their tire marketing lately.
U.S. tire dealers got a wake-up call recently when Ford and Lincoln-Mercury dealerships began marketing themselves as "America's newest tire store."
In Canada, auto company tire advertising has gotten even more aggressive, with dealers complaining that it is becoming increasingly price-oriented. Some Canadian ads promise tires at as much as "50 percent off list price" in an apparent effort to build customer traffic in the auto dealership's service department.
One Canadian auto dealership, Dueck Chevrolet, Cadillac, Oldsmobile Ltd., in Vancouver, already is selling nearly $1 million worth of tires a year and has plans to become western Canada's largest tire store. What's more, the auto dealership is wholesaling to independent tire dealers within a 20-mile radius of Vancouver.
Price-competitive advertising is nothing new to tire dealers. But price advertising by auto dealerships is something different.
In the past, dealers have dealt with price competition by providing better service and banding together to buy tires at volume discounts. There's no reason to think such tactics won't succeed against auto dealerships.
The major issue here is whether auto makers can use their buying clout to secure volume discounts from tire makers that the independents can't hope to match.
With massive original equipment contracts at stake, the pressure auto makers can put on tire manufacturers to grant such discounts obviously will be great.
Tire dealers should battle fiercely to prevent that from occuring.