Kenda Tire USA Inc.'s vice president of automotive, Brandon Stotsenburg, said the tire maker began improving its tire size offerings several years ago in anticipation of the OEMs' vehicle platform shift to light trucks, CUVs and SUVs. He discussed this and other trends with Tire Business:
Q: How would you describe business thus far in 2019?
A: Strong with continued consumer increased demand for growing CUV and LTR segments.
Q: What are some of the pleasant surprises you are seeing in the industry?
A: Even with continuing consolidation at the retailer level, independent retailers continue to thrive in most markets and express optimism for the near term. From Kenda's perspective, there is a growing interest in brand value and desire for better retail margin opportunities, which is our strength.
Q: How have tariffs and/or antidumping and countervailing duties affected your company? How are you reacting to them?
A: We have product segment sourcing for wheels and tires globally. The U.S. government's actions have required different reactions based on the segment and current sourcing. For PCR and LTR tires, Kenda has been prepared for alternative sourcing to increase the supply for our products, while minimizing the duty impacts. We are currently positioned to be a strong value supplier in almost all segments we service.
Q: Where do you see the industry markets heading during the last half of 2019?
A: Globally, there appears to be headwinds. The overall U.S./North American market trends for aftermarket PCR/LTR appear to remain slightly up from 2018, but recent, continued tariff announcements put the overall market trends at risk.
Q: What kind of trends are you seeing in the marketplace? How is your company reacting to them?
A: Continued strength in the LTR and CUV segments — Kenda has new products thriving in these segments which offer premium performance at a value price, with continued new sizing and patterns in hot segments like the R/T segment. Our Klever R/T meets the segment demands for performance on-road like an A/T tire, while performing off-road like an M/T tire with aesthetics designed to stand out for lifted vehicles.
Retail stores continue to consolidate, but the independent dealer channel remains strong; Kenda continues to partner with the independent dealer as our primary channel for the aftermarket. We have added programs and products to enhance these offerings and more importantly, retailer margin opportunities.
There is a growing trend for the All Weather tires which have reasonable mileage expectations and are snowflake-certified. Kenda is evaluating to determine the best way to address this trend with our channel partners.
Online and digital influence continues to expand, aligned with demographics. Kenda continues to update our communication and promotional plans to focus on our Designed for Your Journey message. Additionally, our Podium2Pavement messaging for our light truck products has increased our LTR brand recognition with Kenda competing and winning on the same DOT tires that our channel partners sell.
Kenda has also introduced an Authorized Online Retailer program to engage this channel's strengths to grow Kenda sales in a synergistic way with our brick-and-mortar retailers.
Q: What sectors look to be strong? Are they sustainable for the future?
A: LTR and UHP remain strong along with the CUV segment. Within LTR, the off-road and rough terrain segments are both growing with larger diameter (18-inch-plus) over-indexing relative to market growth. The LTR segment will remain strong as long as the North American economy remains strong; recession will revert back to previous down-market cycles.
The CUV segment will continue to be strong with growing of 18-inch-plus diameters over-indexing moving forward.
Q: What sectors are struggling? How soon do you expect them to rebound?
A: Touring and 14-, 15-, 16-inch sizing; there is some interest with electric fitments related to improved rolling resistance helping this segment. However, smaller tires look to be destined for other markets more than North America. Down-market cycles will assist growth of PCR. Government and CAFÉ will drive electric vehicle growth, but not as strongly with current administration initiatives.
Q: Do you expect to roll out any additional products in 2019? What will they be and what sector will they serve?
A: We have an initial (seven) new UTV sizes in our Klever XT pattern which will mirror our outstanding Klever R/T light truck pattern so consumers can have an R/T and UTV match for trucks.
We have additional sizing which will be added to the following patterns:
- UHP all-season: Vezda UHP KR400
- All-season CUV: Klever S/T KR52
- LTR/P-metric: Klever H/T² KR600
- Grand touring: Vezda Touring KR205
- New LTR pattern announcement at SEMA
Q: Do you foresee any price hikes in the second half of the year?
A: Pending market analysis, raw material pricing and U.S. government decisions regarding tariffs, countervailing duties and anti-dumping, Kenda may announce price movement. At this time, Kenda has announced a pass-through of any tariffs imposed by the U.S. on products sourced from China.
Q: Do you expect any major investments in the next six months?
A: Kenda continues to invest capital in our U.S. steel wheel manufacturing to support both our OE and replacement customers. Additionally, there is continued expansion of our tire plants following previous announcements for capacity growth to support our market growth in North America. This is for new capacity and to balance sourcing related to tariffs.
Q: You've hired several positions over the last couple of months. Has your workforce grown in North America? If so, how much and why?
A: U.S. workforce growth will continue to support our plans related to our OE and replacement customers. As our new product demand with our distributors and retail replacement channels has been exceptional, we have begun adding field support to assist growth. Kenda is proud to have several initiatives, including our Authorized Online Retailer program, which allows our channel partners to grow with Kenda offering better margin opportunities than other brands.