In many respects, 2018 was 'boom' year for industry

AKRON— By many business measures, 2018 was a record year for the tire and automotive service industries in North America, starting with record U.S. tire shipments and rebounding U.S. tire production.

After several years of marginal gains and drops in the passenger tire segment, replacement market shipments of car tires shot up 3.5 percent last to 216.7 million units, according to the U.S. Tire Manufacturers Association (USTMA) statistics for calendar year 2018.

That level of demand was met by both the domestic industry, which increased production 4.1 percent over 2017 to 126.3 million units, and imports, which were up nearly 3 percent over 2017 to an estimated 148.8 million units.

These and other salient industry trends are found in the 2019 Market Data Book, a 20-page section in this issue, starting on page 10.

The domestic output was the industry's highest since 2011, according to USTMA data, and is at least partially due to the ramping up of production by the U.S. industry's newest domestic manufacturers — Giti Tire Group in Richburg, S.C.; Hankook Tire Co. Inc. in Clarksville, Tenn.; and Kumho Tire Co. Ltd. in Macon, Ga.

Together these three plants represent nearly 20 million units of new annual manufacturing capacity. In addition, Continental Tire the Americas and Nokian Tyres P.L.C. have plants under construction in the U.S. (in Mississippi and Tennessee, respectively) and China's Triangle Group has cleared land in North Carolina for a pair of plants, all of which will add several more million units of new annual capacity by 2020 and beyond.

OE car tire shipments rebounded last year after a down year in 2017, rising 4.2-percent to 47.1 million units in a year when North American light vehicle production slipped 2.5 percent to just shy of 17 million cars, SUVs, vans and light trucks.

Sales of new cars, SUVs and light trucks/vans in the U.S. last year were slightly ahead (0.6 percent) of 2017 at 17.3 million units, while sales in Canada fell 1.9 percent to 2 million units.

Of the 17.3 million units sold in the U.S., 4.13 million — or 23.8 percent — were imported from outside of North America, with Japan accounting for nearly half of the imports, according to Automotive News data. These imports represent 16.5 million tires not accounted for in the USTMA OE data.

Taking into account the makeup of the imports, the Japanese tire makers Bridgestone Corp., Sumitomo Rubber Industries Ltd., Yokohama Rubber Co. Ltd. and Toyo Tire Corp. enjoy measurably higher OE market shares than those shown in the Market Data Book.

The rest of the 2018 car imports came from Europe (1.22 million units), South Korea (752,273 units) and "other" countries (108,946), the data show.

While the consumer tire segment's growth was notable, it was the commercial tire segment that showed considerable strength last year, with replacement market medium truck/bus tire shipments rising 9.2 percent, to 21.3 million units, and OE shipments jumping 21.9 percent to 6.5 million units.

Again, the rising demand was met by increased domestic production — up 2.2 percent to 14.4 million units — and imports — up an estimated 13 percent to roughly 16.5 million units, according USTMA and Department of Commerce data.

The commercial segment's bullish year is reflected in a strong year by the trucking industry. According to the American Trucking Associations (ATA), activity by the trucking industry was up more than 6.5 percent throughout 2018, easily outpacing 2017 and the sector's best year-over-year performance in 20 years.

ATA Chief Economist Bob Costello called 2018 a "banner year" for trucking, even though activity slowed measurably toward year-end.

In the light truck tire arena, both replacement and OE shipments rose last year versus 2017, but both production and imports declined as well, according to the USTMA and Commerce data.

Replacement tire market demand in Canada rose in all three major categories, according to Tire and Rubber Association of Canada (TRAC) data — passenger tires up 4.2 percent, light truck tires up 3.6 percent and medium truck/bus tires up 1.5 percent.

Imports of passenger tires to the U.S. from China — which have been subject to elevated import duties since 2015 — plummeted nearly 25 percent from 2017 to about roughly 8 million units, falling behind Thailand, South Korea, Indonesia, Mexico, Canada and Vietnam among foreign sources of car tires.

2018 marked the fourth straight double-digit decline in imports from China.

On the sales side, most tire companies' revenue showed some improvement over 2016, both in unit volume and dollar revenue.

Despite the increased demand for tires indicated by the USTMA and TRAC data, the major tire companies' preliminary results don't seem to reflect the apparent boom year.

Bridgestone Americas retained the top spot in North America with estimated tire-related sales of $9.75 billion, ahead of Michelin North America Inc.'s $9.1 billion and Goodyear's $6.35 billion. Goodyear, for example, noted that on a unit sales basis in its Americas business unit, 2018 was unchanged from 2017. Cooper Tire & Rubber Co. registered a sales decline through nine months.

On the retail side of the ledger, Discount Tire/America's Tire and Bridgestone Retail Operations ranked one and two again, with $4.84 billion and $4.5 billion in fiscal 2017 sales, respectively, according to Tire Business research.

Discount Tire operated 1,020 stores at year-end 2018, compared with 2,222 Bridgestone Retail Operations stores, doing business as Firestone Complete Auto Care, Tires Plus and Wheel Works.

Also worth noting: the USTMA's shipment data showed the share of the car tire aftermarket controlled by "local dealerships" — those with fewer than 10 outlets in a single regional distribution area — rebounded last year, gaining a full percentage point in the passenger tire arena to 14 percent and adding two points in the light truck area to 23 percent.

Other nuggets gleaned from the Market Data Book include:

• Demand for high-performance tires in the U.S. continues to increase, especially on the replacement side, where shipments of tires H-rated and higher now represent 45.5 percent of aftermarket shipments, up from 40 percent in 2016.

The OE share jumped nearly two points to 57.4 percent, the USTMA data revealed, led by shipments of Z-rated tires to U.S. and Canadian car factories, which jumped 20 percent versus 2017.

Aftermarket shipments of H-, V- and Z-rated tires rose 7.3 percent to 98.7 million units. The shift at OE also is reflected in the breakdown of OE tire sizes, where the 10 most popular sizes now are all 17-, 18-, 19- or 20-inch rim diameter sizes. Together they account for nearly 30 percent of all OE shipments.

• Goodyear remained the No. 1 supplier of OE consumer tires last year, outfitting an estimated 25.5 percent of the 17 million cars, SUVs/CUVs and light trucks built in North America in 2018 with its Goodyear and Dunlop brands.

Michelin North America was No. 2 with its Michelin and BFGoodrich brands, ahead of Bridgestone Americas (Bridgestone and Firestone brands) and Continental Tire the Americas L.L.C. (Continental and General brands).

Increasingly the auto OEMs are spec'ing brands other than the traditional major brands, a trend reflected in the list of tire companies supplying the car makers, which now includes brands such as Falken, Hankook, Kumho and Nexen.

Also making strides with OE manufacturers is Sumitomo Rubber North America, which now has responsibility for supplying both Dunlop and Falken-brand OE tires to the U.S. assembly plants of the Japanese car markers — Honda North America Inc., Mazda (North America) Inc., Nissan North America Inc., Subaru of America and Toyota Motor Mfg.

• South Carolina remains the No. 1 tire-producing state with estimated daily tire production capacity of roughly 110,400 units. Oklahoma holds the No. 2 spot at 88,000 units, ahead of North Carolina at 74,000. North Carolina, however, is destined to grow with the commitment by China's Triangle Group to build a pair of plants in the Tar Heel state.

• U.S. shipments of winter/traction tires slid for a third straight year — by about 5 percent — and accounted for just 2 percent of all replacement car tire shipments. By contrast, winter tires represent more than 35 percent of aftermarket car tire shipments in Canada.

It should be noted, though, that the USTMA revised the way it classifies winter tires, putting a portion of all-season tires that carry the industry's 3-Peak Mountain Symbol that previously were considered winter/traction tires into the all-season tread group.

• Vehicle registrations in the U.S. increased 2.7 percent in 2017 (the most recent year for which data are available) to 17.6 million vehicles, including 11 million light trucks and 6.1 million cars.

• Hourly wages for auto technicians rose again in 2017 for the fourth straight year, to $17.81 per hour, according to U.S. Bureau of Labor Statistics data.

The Market Data Book also contains benchmarking information on the automotive service sector and summaries of Tire Business' retail, commercial and retread rankings from 2018.