SAN JOSE, Calif.-Revenue from tire and wheel replacement sales in North America will grow at a pace more than twice that of unit growth in the coming six years, as demand rises for more aesthetically pleasing, higher-performance-and higher-priced-products, according to a new study.
The analysis, from market consultants Frost & Sullivan Inc., forecasts the value of the tire and wheel aftermarket to grow more than 6 percent annually from 2000-2007 to $15.7 billion, whereas unit sales will expand 2.5 percent annually to 291.4 million tires and 13.5 million wheels by 2007.
``The most popular end-user groups for tire manufacturers are light truck and utility SUV owners,'' said Meenakshi Ganjoo, industry manager for Frost & Sullivan. ``Demand for replacement and performance tires for light trucks and SUVs has surpassed that of passenger vehicles or sports cars.''
Light truck/sport-utility vehicle owners routinely upgrade their tires to improve hauling or towing capabilities, Ms. Ganjoo said.
In addition to shifting demand to larger sized tires, revenue growth will be affected by rising prices, she said, as manufacturers try to rebuild margins lost during the explosive rises in raw materials prices during 1999-2000.
Among challenges confronting manufacturers and retailers during the period are: turning consumer safety concerns into profit-generating confidence; maintaining profitability in the face of rising operating costs and price pressures; and overcoming general lack of consumer knowledge about tires.
In addition, the authors of the study said the Firestone tire recall situation will skew the demand for the specific sizes involved for a period of three to four years.
Frost & Sullivan does not foresee any marked changes in the distribution channel breakdown for either tires or wheels during the seven-year period. The one factor that could affect this aspect of the replacement tire business, Ms. Ganjoo said, is the long-term effect of the Firestone recalls. It remains to be seen where Ford Explorer owners who had tires replaced will return for service in the coming years.
Regarding wheels, the study notes vehicle owners increasingly are replacing wheels for aesthetic reasons.
``In a market where style is gaining significance and emerging as a major factor influencing purchasing decisions, custom wheel manufacturers are well positioned to take advantage of the trend,'' Ms. Ganjoo said. The trend to larger wheel sizes and a desire for differentiation will help drive up the per-wheel revenue, the study concludes.
Demand for chrome wheels is definitely rising, but the study offers no concrete forecast.
Custom wheels generated $790 million in sales in 2000, the study shows, or only about 7 percent of the total market for tires and wheels. Of that amount, aluminum wheels accounted for more than 85 percent of the wheel market, with steel wheels taking 12 percent and wire wheels 3 percent.
``Aluminum wheels are the driving force in this aftermarket segment,'' Ms. Ganjoo said, ``as the metal's malleable properties allow for the various sizes and shapes which appeal to both manufacturers and consumers.''
Frost & Sullivan forecast annual revenue from wheels will grow more than 50 percent during the period under review, to $1.2 billion.
The study is based in large part on information provided by 15 tire and 31 wheel makers and marketers in North America. It can be purchased for $4,150.