AKRON (June 29, 2001)—Performance tires, particularly the ultra-high-performance variety, appear as a bright spot in a replacement-market horizon that's otherwise clouded by a lackluster North American economy.
While industry shipments of most types of passenger and light truck tires lagged behind last year's record pace during the first quarter, manufacturers' sales of H, V, Z and Y speed-rated tires—those belonging to the market's fast-growing, ultra-high-performance tier—enjoyed double-digit increases, according to preliminary industry figures. If sustained, such growth would exceed the 8.5-percent annual increase over the next five years forecast earlier by the Tire Market Analysis Committee of the Rubber Manufacturers Association (RMA).
Shipments of performance tires as a whole, including non-speed-rated tires, are expected to increase at a more modest 3.3-percent annual rate during the next five years. Yet this too would surpass the 1.5- to 2.3-percent annual growth anticipated for replacement passenger tire shipments as a whole.
As a group, performance tires last year accounted for about a third (32 percent) of the 198.9 million replacement passenger units shipped in the U.S. Of the 63.6 million replacement tires shipped to the performance sector, the ultra-high-performance tier accounted for about 34.7 percent.
Whether or not the present favorable sales climate for performance tires will continue largely depends on how long and how severely the economy remains in the doldrums, tire company experts say.
Bob Toth, Goodyear brand marketing manager for consumer tires, told Tire Business he believes performance tires are less vulnerable to economic slowdowns than most broad-market tires. Goodyear's own first-quarter sales of performance tires have been nothing short of phenomenal, Mr. Toth said. “Right now, we're running ahead of budget with no problem whatsoever,” he added.
The performance tire market, as it's defined in North America, is quite broad, Mr. Toth pointed out. Many tires lumped into the performance category are merely “cosmetic” or performance in appearance only. Some companies include such tires in the data they supply for the industrywide tally and other companies do not—an inconsistency in reporting that increases the difficulty of quantifying the performance tire market as a whole.
Buyers able to afford the more expensive true performance tires are by nature less affected by economic downturns. However, because cosmetic performance tires combine decent treadwear and durability with a sporty appearance, they too are more immune to economic fluctuations than are most broad market tires, Mr. Toth contends.
Oscar Pereda, Michelin North America Inc.'s technical marketing manager for performance tires, believes the full impact of a continued economic slowdown isn't likely to reach the performance tire segment until later in the year.
Much of the high-performance tire market is driven by youths who have more recession-proof sources of income than older consumers—and few such younger buyers have been affected as yet by the economic slowdown, Mr. Pereda said.
Nevertheless, should the current economic downturn continue or worsen, the jobs and disposable income of younger buyers likewise will be affected, he believes. Most layoffs seen in North America so far have involved large corporations furloughing older, full-time workers. “But if it (the economic slowdown) trickles down to somebody's summer job, then the performance market will begin to suffer,” he said.
Meanwhile, if the industry's lack of a universally accepted performance tire definition complicates the task of quantifying that market segment, the sizable differences in tire applications and buyer preferences inherent in it also pose similar difficulties in generalizing about its nature.
The performance tire segment by Goodyear's definition, for example, includes:
c Sports car lovers, who prefer low-profile maximum performance tires;
c Sport-truck owners, who go for tall, wide tires;
c Hot rodders, who like to match large-diameter rear tires with smaller fronts; and
c The rapidly increasing “tuner” or “compact-restyler” group that typically wants short, wide tires having a large center hole.
But these groups of auto enthusiasts merely represent the categories Goodyear is concentrating on at the moment, Mr. Toth said—and by no means do they constitute all there is to the performance tire market.
Other buyer groups that also should be considered are the fans of muscle cars, vintage and low-rider cars and those enthusiasts wanting to give a high-performance appearance to their off-road vehicles
The key to selling to these groups, Mr. Toth said, is to determine the demographics of each market segment and establish the proper pricepoints on the basis of those findings. Next, he said, identify those tire sizes that can accommodate a wide cross-section of that vehicle population. “Otherwise,' he said, “you can end up with an SKU nightmare—with every size under the sun. Ideally, you zero in on a size that does the job and covers a wide array of fitments.”
Michelin's Mr. Pereda sees similarities between the young enthusiasts who typify today's “tuner” market and yesterday's hot rodders and custom-car buffs. “In many ways,” he said, “they (tuners) are exactly like that generation. It's the same basic urge to create something unique—to create something that wasn't there before, to make a personal statement.”
Just as hot rodders and muscle-car buffs of the past created their own subculture, today's sport-compact or tuner-car enthusiasts are doing much the same thing. Tuners—relative newcomers on the hot-car scene—are beginning to have their own music. And just as yesterday's car enthusiasts had their cult movies, June 22 marked the official release of Universal Studio's new film, “The Fast and the Furious,” a youth-oriented flick featuring plenty of tuner car racing action. Most observers, including Mr. Pereda, see it fanning the flames of the sport-compact craze just as earlier films romanticized the “hot-car” phenomenon of their eras.
Some dealers may be trying to figure out this new generation of car enthusiasts and how best to turn them into customers, Mr. Pereda said. Part of the answer, he believes, is to repackage the same techniques that appealed to previous generations of car buffs—keeping in mind that various segments of this newest crop have their own product needs and preferences.
By now, most tire dealers are aware of the opportunities offered by the sport-compact segment—“and I think there's more of that to come,” Mr. Pereda said. “Not only do we have more people souping up these cars, but we also have a large body of cars that have already been modified and now need replacement tires.”