OE tire market
The OE tire market has grown about 5 to 6 percent for the first half, but even that falls short of the growth rate last year, he said. Nonetheless the growth is encouraging as more and more consumers are purchasing new vehicles despite a sluggish economy.
"It's ironic because you would say, 'If the economy is impacting the replacement market, why are so many people buying new vehicles and why isn't the economy affecting that?'" Mr. Clark said.
"Again, I think part of that is, with an 11-year-old-average vehicle age, you just got people who have no choice. They've got to buy new vehicles and I think that's part of what's continuing to drive the OE market despite the economy."
Consumers are not just purchasing economy vehicles, either — they are selecting a wide variety of price points. Last year, when high gas prices reigned, fuel-efficient compacts were popular; now pickup trucks are the big sellers again, according to Mr. Clark.
"We are seeing consumers who are buying the normal mix of vehicles. It's not skewing one way or another based upon the economy. There's no indication in the vehicle mix that there's a huge economic situation that consumers are facing."
That means there is still a strong demand of high-performance and large-sized OE tires, he said.
Replacement tire trends
"We've seen consumers who have been very aggressive in postponing the replacement of tires because of the economic pinch," Mr. Clark noted.
"As the economy recovers, again we think the replacement market will recover and we think demand will go up. Tire dealers have to be careful that they're not running their business with zero inventory.
"We see inventory levels very, very low. As the market recovers, the people who are best equipped to satisfy that demand, I think, will benefit. That's a little bit of a watch out for tire retailers going forward."
While demand for performance tires is up overall, Mr. Clark noted, there is a slight slump in demand for Z-rated tires.
"It is the first time, if you look at year-to-date, the Z-speed-rated market is basically flat vs. year-ago. We haven't seen that. We've always seen, I'd say typically, low-double-digit growth in Z. At the same time, the V-speed-rated market is up 13 percent and H is up 5 percent.
"We know there is a seasonality, particularly for high-performance tires, so I don't want to draw any big conclusions other than to say we've seen Z so far this year a little softer than we've historically seen," he said.
Overall, he noted, the performance segment continues to grow and outpace the total tire market.
Mr. Clark also claimed manufacturer fill rates for the replacement market are improving.
"The last three or four years was a period of weak market environment that has helped us improve our fill rates. I think those of us who are dealing with high OE demand, that's where the challenge is, making sure we're satisfying the strong demand from OE while continuing to serve the replacement market.
"But overall I would say that industry fill rates are improving."
Pricing
Raw material prices saw stability and even some slight declines toward the end of last year, Mr. Clark said.
"Our forecast is we see slight growth in raw material (pricing) over the second half of the year—but our success rate at predicting raw material prices is not much better than our success rate predicting the market," he quipped.
Noting that one needs a crystal ball to predict raw material pricing trends, he said that if the general softness in the market continues this year, "I personally don't see tire prices going up, unless there is a significant increase in raw material prices. And we're not projecting a significant increase.
"Because of the fact that in the second half of last year we saw some softness in raw materials, if anything, you've seen some very targeted downward pricing adjustments that people have made. I think if the materials environment remains relatively flat like we think it will be, even with some slight growth, I don't think you're going to see people running out and making meaningful price increases. I think we'll see an overall stability. But who knows?"
Truck tire trends
"We are seeing two trends in the heavy truck market segment — super-regional applications and fuel savings," Ms. Young said.
"The first trend is fuel savings. As the cost of fuel increases, the importance of fuel economy becomes more relevant. For most fleets, fuel costs represent the single highest non-payroll operating expense.
"To this end, rolling resistance accounts for approximately a third of fuel costs. The lower the rolling resistance, the less fuel consumed," she said, noting, "a 3-percent reduction in rolling resistance translates into a 1-percent fuel savings or an increase of 0.05 miles per gallon. Low rolling resistance tires can offer both fuel savings as well as performance.
"Fleets are paying as much attention to the fuel-savings ability of the tire as they are the mileage capabilities.
"The second trend is the super-regional application — which is an emerging segment," Ms. Young said. "Super-regional trucks operate approximately 80,000 to 100,000 miles per year, often within a 500-mile radius. This application is the result of both increased urbanization and truck driver shortages.
"More and more people are moving to the large cities; this increases the need for the delivery of goods to urban areas.
"In addition, truck drivers are more attracted to jobs that allow them to be home in the evening. We see more of the industry going to a spoke-and-hub type delivery system. Both trends result in shorter and demanding routes as fleets run between major cities. Once they arrive in the city, the fleet acts more like a regional delivery truck.
"The trend creates a hybrid application. Fleets are looking for the mileage and fuel efficiency of a line haul product with the scrub resistance of a regional product."
Wide-base tires
Wide-base single truck tires are gaining popularity among fleets, according to Ms. Young.
"More and more fleets and owner-operators are seeing the benefits that this innovative technology provides, and the number of tire manufacturers now producing and delivering wide single tires to the trucking market has increased dramatically over the past 12 years," she said.
"With rising fuel and operations costs, the fact that the Michelin X One tire can save up to 10 percent in fuel and almost 200 pounds per axle cannot be overlooked. Michelin provides six different wide-base single-tread designs and five different retreads for a variety of applications. All applications have a need to save fuel and weight and Michelin is expanding the benefits of our wide-based tires beyond just line-haul applications."
The number of truck servicing locations — including commercial dealerships and truck stops — providing wide-base tires and service has increased across North America, she said, noting that X One tires are available at more than 2,000 points of sale across the U.S.
"Through our emergency road service, Michelin ONCall, the response times for X One tire calls is comparable to that of dual tires," she said.
Retreads
The demand for retreads also is growing, Ms. Young said, as the trucking industry looks for ways to save on costs.
"There are many companies in the retreading business and many different types and quality of retreads now available. Precure and mold-cure tread rubber are available for commercial end users, and the rubber compounds and tread patterns are designed for applications," Ms. Young said.
"Retreading is paramount to a customer's operations. The goal is to deliver performance levels in retreads that are comparable to those in new tires for maximum fleet value," she said.
"Each company has its specific requirements of what it is looking for in a retread. It depends on the fleet's casing management, turnaround time, needs availability of the necessary product, level of dealer service, online reporting needs and fleet location. In the long run, retreads offer excellent mobility solutions that can lead to cost savings and environmental benefits."
Technology trends
Passenger vehicle manufacturers also are pushing for tires with improved fuel efficiency, as well as performance, according to Mr. Clark.
"Our ability to offer the OE manufacturers very low-rolling-resistance tires without compromising other performances is of greater value and interest to the OEs than its ever been in the history of our relationship with the car manufacturers."
However, the demand for fuel-efficient tires is not as great on the replacement side, he noted.
"The reality is, many consumers still don't understand the link between tires and fuel efficiency. That's something certainly we want to continue, over time, to educate consumers on. I think it's an opportunity for the overall industry to do that.
"Today it's not one of the top one or two criteria consumers are using when they are buying replacement tires. But I think that, long-term, we live in an environment of high to increasing fuel prices.
"It's going to become increasingly relevant for consumers if we get into tire grading that grades tires on rolling resistance. I think it becomes more visible to consumers.
"I think over time (fuel efficiency) will become a bigger factor. Today it's not as big of a factor in replacement as we would like it to be."
In addition to educating consumers on the fuel efficiency of various tires, Mr. Clark said he believes tire dealers and manufacturers need to continually remind consumers on all various technologies and performance features built into today's tires.
"It's in everybody's best interest — whether it's a tire manufacturer or a tire retailer — to remind consumers that, A, tires are important and B, there are differences in tires and to tell that story. I think it is valuable so consumers don't think that a tire is simply a mileage warranty and a price point and that's it."
He said he believes the tire grading labels that have been proposed for the industry can be an effective visual tool in explaining the different types of performances in tires to help consumers compare tires.
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To reach this reporter: [email protected]; 330-865-6127.
