Our annual two-part Mid-Year Tire Report offers an outlook on business conditions for the remainder of the year, from the viewpoint of experienced tire company executives and dealership owners. Part I of the report was published in our June 8 edition, and Part II was featured in our June 22 edition.
A year ago, no one anticipated that the industry would be reeling from a pandemic that disrupted global economies.
When stay-at-home orders were put in place around the world in March, fewer people were driving and demand for tires dropped significantly. Both in an effort to keep their employees safe and reacting to the falling demand, most tire makers idled production for at least a month — sometimes more, depending on the company and what type of tires a specific plant produced.
Tire dealerships, for the most part, remained open as "essential businesses" under the various state quarantines that shut most other businesses temporarily, but they still suffered from plummeting sales as many consumers refrained from servicing their vehicles.
Now, with more and more non-essential businesses reopening, consumers increasingly are returning to normal activities, and dealerships are seeing business trend upward. Fortunately for business owners, consumers are tired of staying home. (Whether that's a good or bad thing "pandemically" speaking, remains to be seen.)
But it's hardly a return to normal for the industry. Dealers contacted by Tire Business have adapted their operations to reduce the spread of the coronavirus. Employees are wearing facemasks and gloves, cleaning the shops multiple times a day and observing social distancing with customers. Many shops are offering customers "no contact" service or vehicle pick up and delivery.
Some dealerships expect these practices to continue for the foreseeable future under recommendations of the Centers for Disease Control and Prevention.
Some dealerships also are noticing a shift in consumer buying habits. Customers, many of whom experienced layoffs and furloughs from their jobs, seem to be trying to save their money by choosing lower-priced tires. Several dealers and tire makers said they have seen an increase in sales of Tier 2 and 3 tire brands at the expense of Tier 1 premium brands.
"As the economy has been stressed, consumers are actively seeking value, but don't want to surrender expected performance and safety. We are consistently overindexing in sell-out performance with our channel partners responding to exceptional margin opportunities," Brandon Stotsenburg of American Kenda Rubber Industrial Co. Ltd., said in our June 8 edition.
Consumer cautiousness also may benefit dealerships as consumers put more miles on their vehicles by opting to drive to vacation spots rather than fly and hanging on to their aging vehicles rather than purchasing a newer, more expensive vehicle.
However, the potential increase in mileage may be offset by a high number of workers who continue to work from home rather than commute to the office over the summer.
The crystal ball is indeed cloudy when it comes to forecasting the remainder of 2020, but tire dealers seem to be optimistic about business returning to previous-year levels for the next six months, barring any surprises.
But then again, it is 2020!