It doesn't seem to matter what type of tire it is, there's always a competitor out there willing to undercut the lowest price.
That's true of passenger, light truck and medium truck tires, and true even for the makers and marketers of specialty and industrial tires.
The marketplace for this latter segment-which includes tires designed for skid steers, all-terrain vehicles, lawn and garden tractors, golf carts, fork lifts, construction and farm equipment and other similar vehicles-is especially competitive right now, according to several specialty and industrial tire executives interviewed by Tire Business.
They pointed out that in the past few years, specialty and industrial tire manufacturers from China have been flooding the North American market with low-cost tires. This in turn has driven down prices of these products, reducing profit margins for makers and marketers in this region of the world.
Ironically, many of these same North American companies have their lines of specialty and industrial tires made for them in China to take advantage of significant savings on labor and other manufacturing costs.
It's just one of the distinct twists in this not very glamorous but important part of the tire business.
The growth of imported Chinese-made specialty and industrial tires in the U.S. and Canada has gained momentum over the past few years, said Tom Dell, vice president of sales and marketing for Canada's Unitrac Industrial Tires Inc., a part of the Solideal Group.
The reason is the lower cost of these imported tires, and as Mr. Dell put it, ``the cost accounting in the Chinese product is suspect.''
In Chinese tire plants, labor, utility and other costs often are less than in the West and many factories are supported financially by the Chinese government. As a result, according to Mr. Dell, these companies can charge what they want to establish a product in North America.
``We know what it costs to make a specialty product,'' he said. ``So if you see that same product made in China come into the North American market at a price similar to your costs, then that's when their credibility is lost as far as pricing goes.''
This is not necessarily a bad situation, however, Mr. Dell said, noting how the tire industry is inherently competitive. ``What's bad about it,'' he added, ``is that all the profits are going to China.''
Still, ``from a competitive point of view, it keeps everyone sharper, and to me that's a good thing. Competition is good,'' he said.
Dennis Cates, vice president of Del-Nat Tire Corp. in Memphis, Tenn., has seen the same growth trend in Chinese-made specialty and industrial tires coming into North America. ``The reason is that you've got more North American companies going to China looking for Chinese companies and dealing with Chinese companies,'' he said.
Coinciding with this trend is the growing number of brokers in North America who have sprung up to import these types of tires, noted Galaxy Tire & Wheel Inc. Managing Director Neil Ganz, who operates from the company's Hayward, Calif., facility. ``Many of these importers are not well financed, which requires them to move tires at extremely low prices,'' he said.
The Internet also has played a factor with importers, he said, by making it easier ``to pick up a container of tires and have it delivered here.''
But price is not the only issue affecting the North American industrial and specialty tire business.
The weak economy of the past few years also has put downward pressure on margins, said Del-Nat's Mr. Cates. And with a slower economy comes weaker margins.
Still, as Mr. Ganz noted, the market has strengthened somewhat from late 2000 and 2001.
``This year looks like we will have slight growth,'' he said, as a result of manufacturers paring down their inventories. This has left them better positioned to build tires needed by the market, ``so there is a better flow.''
Another change impacting the specialty and industrial tire market is that users of these products are becoming better informed about product use and application and are shopping not only for the best price but for the best product at the best price, Mr. Dell said.
Mr. Ganz agreed, pointing out that ``the customer today is more focused on the value of their dollar and what they are getting for that dollar.''
This makes training of dealer personnel more important than ever, those interviewed said.
Selling industrial and specialty tires is different than selling passenger, light truck and medium truck tires and requires a special knowledge, Mr. Ganz explained. And this requires additional training.
At Galaxy Tire, this has evolved from holding classes at the company's own facilities to now taking the training to the customer. ``We help train their sales guys, driving in their trucks and helping them to sell to their customers,'' he said.
And providing good service is a key to keeping margins respectable, Mr. Cates said. ``You can hold the margin, if you provide the service.''