I can't believe it's April already. Years ago April was the month when the American Retreaders' Association (ARA) — later known as the International Tire & Rubber Association (ITRA) — held its annual retread show in Louisville, Ky.
About 3,000 people attended this show every year, which was both a celebration of retreads and spring. Most of the principals of the commercial truck tire and retread industry flocked to Louisville like swallows returning to Capistrano and took over all the hotels and restaurants in town. No matter where you went, you bumped into people talking truck tires and retreads.
Tire Business was there on the scene and always published its "Commercial Tire & Retreading Report" around that time too.
While the retread show faded into the sunset when the ITRA merged with the National Tire Dealers & Retreaders Association and formed the Tire Industry Association (TIA), Tire Business continued to report on the commercial tire and retreading industry in April.
And that's why you are reading this today. Yes, old habits die hard.
Back in the late 1970s when I first attended the ARA Show there were over 1,500 retread plants in the U.S. That number dwindled to around 700 in the 1990s but now hovers around 850.
About half of the retread plants in the '70s still produced passenger retreads, but within a few short years went out of business when low-cost imported passenger tires took over that segment of the market, leaving truck, OTR and aircraft retread shops and only a handful of stalwart passenger retread plants. Things certainly have changed since those long-ago days.
Today retread plants have high-tech equipment controlled by computers, lighting is exceptional, personnel is well trained and plants are well laid out and organized to ensure the most efficient processing and the highest productivity and quality.
Changes in industry
Most of the independent truck tire retreaders have become part of large tire company retread networks such as Bridgestone Bandag, Goodyear, Michelin Retread Tire/Oliver, Marangoni Tread and most recently Continental.
Very few are truly independent anymore. And the growth of some commercial truck tire dealers and retreaders has been phenomenal through expansions and the purchase of other dealers and their retread facilities.
High market demand in 2017 resulted in record aftermarket shipments of 19.2 million truck/bus tires in the U.S., which was an increase of 4.3 percent over 2016 (18.6 million units), according to U.S. Tire Manufacturers Association (USTMA) data.
Over the last few years, retreaders have felt the pressure of competing with questionable quality, imported truck tires that have flooded the market at lower than market prices.
Retreaders are worried that truck tire retreading could go the way of passenger retreading due to the presence of low cost imported truck tires in the market.
In June 2016, the U.S. International Trade Commission (ITC) agreed with the United Steelworkers union (USW) and voted to enforce import duties on Chinese-made truck and bus tires that were being dumped on the market. These duties were expected to remain in place until 2020, but in February 2017 the ITC reversed itself and dropped the duties, declaring that "no harm" was being done to the tire industry.
Retreaders have been wringing their hands and biting their nails since last year's decision by the ITC. Many dealers reported losses in their retread business and told of receiving e-mails from Chinese tire companies offering new tires priced below the cost of a quality retread, which is about one-third to one-half the cost of a new truck tire.
They were rightfully worried since what followed this decision was an instant increase in low-cost imports from China, which led to a decrease in retreaded truck tires. Cap and casing sales were especially hurt, since truckers could buy a new Chinese tire for less than a cap and casing.
Some private fleets, trailer leasing companies and owner operators tend to purchase these low-cost Chinese tires. However, many dealers have since reported that while the request for Chinese products is still there, it has lessened in the last year or so.
According to U.S. government data, the number of truck tires imported into the U.S. from China dropped more than 2 million units since the ITC's preliminary duties ruling in early 2016.
Chinese imports drop
U.S. government data show that imports of Chinese truck tires have leveled off, as key Chinese tire makers moved production to other Asia nations, primarily Thailand but also Indonesia and Vietnam.
And lately, with the threat by the Trump administration of imposing tariffs of up to $50 billion worth on Chinese products in an effort to bolster manufacturing jobs in the U.S., these tires may continue to be exported to countries other than America.
However, opportunities still exist for a growing number of low-cost tire manufacturers based in other Asian countries such as South Korea, Indonesia and Vietnam to step up since domestic manufacturers can't totally supply the market.
Fleets that have their own casings retreaded understand the importance of buying quality tires that they can retread two to three times and which are supported by tire companies with nationwide networks of repair shops, distributors and road service assistance.
They value this service far above the money they could save by buying container-loads of suspect-quality tires that may have no warranty and no service support.
Many fleets also have been burned by low-cost tires that have been of low quality and have no intention of repeating that mistake.
In addition, many carriers are trying to be "green" in order to satisfy their shipping customers, so they are sticking with retreads rather than buying tires that can't be recycled. As a result, many tire dealers are reporting growth in this segment of their businesses as carriers expand their fleets, run more miles and wear more tread off their tires.
Commercial tire dealers also must be credited for their tireless efforts to focus on selling the benefits of retreading and the value of a new tire that can be retreaded multiple times.
A study released last year by Frost & Sullivan reported that although 64 percent of U.S. fleets have purchased low-cost import tires at some point, only 23 percent intend to continue purchasing them.
The impact of truck tire imports has not just been felt by retreaders.
Prior to the early 2000s, the truck tire market was split almost evenly among Bridgestone, Goodyear and Michelin, with each holding somewhere between 25 and 30 percent of the market. The remainder was taken up by four or five Tier 2 tire manufacturers and a few private branders, but the Big 3 ruled.
Today the market is very different. Over the past five years, Tier 3 and 4 imports have some taken market share away from the Big 3.
In the future, the U.S. will see continued expansion of imports within the marketplace and quality improvements in foreign manufacturers' products. Some Chinese products already have established quality credentials with fleets and retreaders, and other Chinese manufacturers are expected to keep improving the quality of their tires, although they will be priced higher than the previous versions.
Another segment of competition that is disrupting the truck tire and retread market is truck stops. In the early 1990s truck stops started carrying and selling truck tires, primarily Bridgestone since Bridgestone was the first tire company to recognize this distribution channel.
Today major truck stop chains offer carriers numerous brands of tires, a line or two of retreads and a tire-buying program tied into fuel purchases in addition to the vehicle repair services they have provided for years.
Love's Travel Stops now has become its own retreader, opening four Oliver Rubber-affiliated retread plants throughout the U.S., while TravelCenters of America contracts with over 140 company-owned and independent retreading shops to offer Goodyear and Bandag truck tire retreads.
As you can see, the one big thing that truck stops offer is the one-stop shop.
How are commercial tire dealers to compete with all of this competition?
Well, what are your fleet customers' needs?
In this age of e-commerce and the expectation of not only just-in-time deliveries but just plain moving freight fast, fleet operators are focused on uptime and keeping their trucks rolling.
As a result, there is now a greater emphasis than ever before on full-service capabilities and using data better to operate, maintain, and keep commercial vehicles and their tires running down the road.
So commercial tire dealerships that provide full-service solutions to their customers are growing.
Those that provide not only tires and retreads but also road service, on-site tire service, fleet checks, a mounted tire program and truck services such as mobile truck and trailer repair services, truck alignment, oil changes, truck and trailer repair and safety inspections, as well as fuel that can save fleets and owner-operators time and money are being very successful.
Further the use of Internet-based reporting systems that provide more effective customer service is becoming the norm. Fleets are jumping into various truck and tire-related technologies at an ever increasing rate that provide them with useful data that have the potential to save them money and improve uptime and safety.
Commercial tire dealers must also learn to use and capitalize on these technologies as well. They will make you better at providing the full-service solutions you offer.
Bright future ahead
So what does the future hold for the commercial tire and retread industry?
Let's take a quick look first at the health of your customers, the trucking industry.
First off, the for-hire segment of the trucking industry grew by nearly 38 percent from 2009-16, according to the U.S. Department of Transportation. As the economy continues to expand, so will the trucking industry. That means there will be more trucks and more truck tires on American roads.
In the short term, the outlook for trucking is fantastic.
According to the American Trucking Associations (ATA), the trucking industry is seeing the best economic climate since deregulation in 1980 and should have smooth sailing over the next year or two.
The U.S. economy is growing in early 2018 at a 2.7-percent rate and should maintain that growth for the next couple of years. However, there are a few things that could shatter this forecast such as a war with North Korea, pulling out of the North American Free Trade Agreement or a global trade war.
As a result of this economy growth — spurred in part by the federal tax reform package — the freight market is booming, and the majority of trucking companies plan to increase fleet size this year.
Freight tonnage was up 7.1 percent in January and February, according to ATA figures, compared with the same two months in 2017.
Truck purchasing is a good barometer of fleet sentiment, and the industry's overall health and orders for new trucks and trailers are record breaking so far this year.
If orders continue to pour in as they have in the first quarter, orders for Class 8 trucks and trailers could reach 330,000 and 334,000, respectively. By comparison, Class 8 truck order were 290,000 in 2017, 250,000 in 2016 and 284,000 in 2015.
Perhaps the biggest challenge fleets have in early 2018 is attracting and retaining drivers.
It is estimated there are about 500,000 drivers in the long-haul, for-hire truckload segment of the industry, but that category is about 51,000 drivers short now.
As a result, there is a capacity crisis occurring as surging freight growth is combining with lower productivity due to the government's mandate that fleets must now use electronic-logging devices. Truck utilization or capacity has been running at 100 percent for the past 5 months.
Freight growth and equipment demand is expected to remain steady going into 2019, while capacity utilization is expected to ease later this year.
So in a nutshell, the outlook for trucking is the best it's been in years. That means your customers are healthy and profitable.
Despite all of the marketplace challenges, commercial tire dealers and retreaders are very optimistic about the future, as am I. According to Infiniti Research Ltd., a market research company, the tire retreading market in the U.S. is forecast to grow at a compound annual growth rate of 13.6 percent between 2017-21.
I know commercial tire dealers and retreaders are optimistic about their future, too, since in the last year they have invested in buildings, equipment and expanded and/or added stores and personnel.
The commercial truck tire industry probably will continue to consolidate with large dealers acquiring smaller ones, but it must and will continue to grow to meet the demands of the expanding and demanding trucking industry.
Peggy can be reached via e-mail at [email protected].