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December 29, 2017 01:00 AM

OUR VIEW: Resolve to make 2018 a success

Tire Business Staff
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    The market could see a repeat of volatility with regards to raw material prices, which, in turn, could lead to tire manufacturers imposing additional price increases.

    Consumer demand could stay stagnant, or even fall. A natural disaster or a domestic terror attack could send markets tumbling.

    That's the world in which we live.

    In spite of such concerns, industry experts say 2018 looks as if it will be another strong year for the tire and automotive service sectors.

    Experts point to positive signs out of Washington D.C., where the administration's focus on reducing regulatory burdens, as well as the recent passage of the Tax Cut and Jobs Act, has business leaders feeling confident heading into the new year.

    With the tax rate for most corporations reduced to 21 percent from 35 percent — the lowest rate since 1938 — that puts real, hard cash into the hands of tire dealers.

    Whether they choose to bank the cash or use it to invest in more equipment and/or additional personnel remains to be seen, but the simple fact is business owners will pay less in taxes in 2018 than they did in 2017.

    In addition, some dealers are encouraged that the new law doubles the estate tax exemption, though the Tire Industry Association was hoping the tax would be phased out altogether.

    Meanwhile, foreign tire manufacturers continue to stake out their share of the North American market.

    In 2017 alone, South Korea-based Hankook Tire Co. Ltd. and Singapore-based Giti Tire Group opened their first U.S. tire plants.

    Meanwhile Finland's Nokian Tyres P.L.C. and China's Triangle Group Co. Ltd. announced plans to open factories in the U.S. in the coming years, while China's Guangzhou Vanlead Group Co. Ltd., a China state-owned entity that controls Wanli Tire Group, announced its intention to do so as well.

    Could 2018 be the year in which other global players — such as India's Apollo Tyres Ltd. and/or South Korea's Nexen Tire Corp. — join their competitors by announcing plans to construct plants in the U.S.?

    The commercial trucking industry is rolling into 2018 with high expectations, as well. The American Trucking Associations (ATA) reports that truck tonnage surged 7.6 percent year-over-year in November after a 10.5-percent increase in October, which bodes well for the future.

    In the fourth quarter, sales of Class 8 tractors and trailers were strong as freight tonnage continued to grow and capacity tightened. Experts say North American Class 8 production will increase 26 percent in 2018, to 321,966 units, over 2017.

    With sales brisk in 2017 for all types of trailers, experts believe that sales in 2018 will increase 1.4 percent to 285,000 units.

    Editorial cartoon by Leo Michael

    The automotive aftermarket also expects 2018 to be strong. Even though sales are expected to fall, forecasters believe the aftermarket will grow at a rate of 3.4 percent per year for the next three or four years, driven by increased costs of technology.

    Consumers today have few qualms about buying premium aftermarket products, such as wiper blades and synthetic oil, which is good news for the aftermarket industry.

    As light vehicle sales level off, the average age of vehicles continues to increase, resulting in additional and oftentimes costlier repairs.

    There is a big shift afoot in the automotive industry toward SUVs, CUVs and imports. In fact, CUVs accounted for 20 percent of all sales in 2016, up from 14 percent the prior year.

    And by 2022, forecasters predict that sales of imports will outpace domestic sales, 56 to 44 percent.

    All of those trends open up growth opportunities for automotive service, especially with imports.

    Some dealers see opportunities in automotive service sales, as well. Michael Rizzo, president of Oahu, Hawaii-based Lex Brodie's Tire Co., said he is projecting an 11-percent increase over budget on the automotive repair side of his business in 2017 and he sees that momentum carrying into the coming year.

    "While we are expecting tire unit sales to rebound in 2018," Mr. Rizzo said, "we are also expecting our automotive repair side to continue to grow, as consumers are tending to keep their vehicles longer."

    Dealers, however, should not sit back and wait to reap the benefits of what 2018 promises to offer.

    With tire sales expected to remain flat, one sure-fire path to growth is to take business away from competitors.

    For an independent dealer, perhaps that means aligning with a strong marketing group. Or maybe that means finding another profit center or increasing the shop's social media presence to reach consumers, particularly Millennials.

    The signs point to a strong 2018. But it will be up to each individual dealer to find a way to make the coming year the best yet.

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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