Double Coin balances commercial supply, demand

MONROVIA, Calif. — Walter Weller, senior vice president at CMA L.L.C., the North American subsidiary of Double Coin Holdings Ltd., told Tire Business that demand in the commercial tire industry continues to grow in 2022.

How would you describe business thus far in 2022?

So far in 2022, the commercial truck tire business is very strong, tracking at about an 8% increase over 2021. This is after we saw a 20% increase in 2021 versus 2020. If this demand continues, we could be looking at two of the strongest years of back-to-back growth in the replacement market in many decades.

How has the pandemic changed the way you do business?

Wow, in so many ways. We modified office hours for our home office staff, adapted from in-person customer contacts to remote-style video meetings, modified our system for handling container shipments to customers, and modified customer ordering to improve product flow, just to name a few of the changes. Virtually everything was changed and many of these changes are now standard operating procedures.

Have you been able to keep up with commercial tire demand?

The honest answer is no. 2021 and now 2022 are unprecedented in the growth we are seeing in the replacement market. I don't believe anyone anticipated this coming out of the COVID-19 pandemic.

As I mentioned earlier, we have implemented new methods of handling container shipments to customers and streamlined the customer ordering process to improve the flow of product.

Do freighters continue to be the biggest bottleneck in the supply chain?

Yes, absolutely. In 2021, we were blind to where the containers were after they were put on the ship. At the height of the supply-chain issue, we had containers that were at the docks in Long Beach and Los Angeles ports but couldn't be located due to the tremendous number of containers they were handling.

At one point there were more than 100 container ships waiting off the coast to dock and unload. 2022 has been better, but the challenge for us as well as our customers now is handling and scheduling multiple containers for delivery.

Are you being hit with unexpected premiums?

Without a doubt. Aside from ocean freight costs which have increased four-fold in some cases, the costs for delayed deliveries and demurrage are a big issue. Over-the-road-trucking shipment rates have increased dramatically as well as rail shipment rates. At one point in late 2021, rail rates were higher than over-the-road truck rates.

What was the strategy behind the recently launched marketing portal for dealers?

We want to improve communication with our dealers, make it easier for them to access information they may need for marketing purposes without having to pick up the phone and call someone. It is still a work in progress, but so far it has been well received.

What continues to drive your growth?

We are a premium player in the value segment or Tier 3 market. We have been focused on supplying high quality tires to our dealers at a reasonable price. That strategy has proven itself over the past many years.

What are you telling dealers who are unable to get certain tires?

We try to be honest with them about availability and as transparent as possible about lead times, deliveries and manufacturing capacity increases. Most of our customers understand because this is affecting everyone.

What are some pleasant surprises in the industry?

The growth in the business and our customers' understanding of the new realities we are all facing in the tire industry — from ocean freight costs, supply-chain issues, manufacturing capacity issues, to inland freight issues.

What kind of trends are you seeing in the marketplace?

The emerging EV and hybrid market in commercial vehicles is no longer just a trend. It is a reality. Our strategy of marketing a strong, durable four-belt casing, which can be retreaded multiple times, fits the needs of this segment extremely well. With the extra torque of EVs, drive tires will wear more quickly and casings that are capable of multiple retreads will be at a premium and in high demand.

Do you expect to roll out any additional products in 2022?

We have introduced a new 3PMS snow tire line called RSD3 in 11R22.5, 11R24.5 and 225/70R19.5, and we have added two sizes of the REM2 in the ROTR segment, 775/65R29 and 875/65R29. These are available now.

How is the company addressing sustainability?

Like many others, we are pursuing new materials and other activities that would bring us to net zero/neutral carbon emissions.

How do you explain recent price increases?

There have been multiple price increases in 2021 and 2022 and some have been double-digit increases that are driven by cost increases in virtually every aspect of our business. Supply-chain issues, ocean freight and inland freight costs, raw materials increases, wage and salary increases, fuel and inflation have all hit the tire industry at once. However, these are not unique to the tire industry. Almost every industry has had to deal with these same issues.

Do you expect prices to stabilize anytime soon?

Eventually, yes, but the timing is the question without an answer. The Federal Reserve has already begun to increase interest rates in an attempt to cool the market for everything. The trick will be to create a soft landing for the economy. The fundamental issue driving many of these increases is ocean freight costs. We are an import market and have been for many, many years.

Over 50% of what we purchase in the U.S. is made somewhere else, and tires are no different. Domestic manufacturers are some of the biggest importers of tires which are made in Canada, Mexico and Southeast Asia. Unless that changes, we may see prices stabilize, but a return to 2019 level pricing is questionable.

Do you expect any other major investments in the next six months or year?

Unlike others in the tire industry who implemented furloughs, staff reductions and wage reductions during the COVID pandemic, we added personnel in both sales and office staff, added to our distribution system with a new warehouse in Texas and are in the process of a capacity expansion in our Thailand manufacturing facility, which we expect to be completed in the early third quarter of 2022.

What are some of the challenges of the industry?

Tire industry challenges remain in attracting high quality future leaders to the industry as well as retaining employees.