Samuel Felberbaum, president of Los Angeles-based Prinx Chengshan Tire North America Inc., (PCTNA) said the company has seen a "return to normal" in many segments so far this year, thanks to its value-tier placement. He filled us in on the latest company news for this Mid-Year Q&A.
In recent months, passenger and light-truck (P/LT) business orders have been gradually returning to normal levels. However, orders for truck and bus radial (TBR) tires have been limited over the past six months due to excessively high inventories. Nevertheless, there are positive signs indicating that TBR orders will return to normal levels in the second half of 2023.
Our company operates in three segments: P/LT, TBR and STR (specialty trailer tires). Initially, all three segments faced a slow start to the year due to high inventories at higher costs. However, P/LT business began to pick up at the start of the second quarter, and there are indications that TBR orders may experience a similar uptick in the coming months. Meanwhile, STR business remains slow.
The impact of inflation might be the reason behind the recent improvement in our unit sales, as consumers appear to be opting for value-tier brands.
We are confident that our brands, Prinx and Fortune, provide exceptional value and performance without requiring customers to overspend on tire purchases. Despite the ongoing conflict in Ukraine, it does not seem to have had a negative effect on our business in the United States.
Delivery times from Laem Chambeng, Thailand, to the West Coast ports (specifically Los Angeles and Long Beach) have returned to normal, but the unsettled contract with the longshoremen remains a concern. Additionally, there are delays in rail transportation and last-mile delivery, even after the products arrive.
Moreover, freight transit times from Asia to other U.S. ports have improved, particularly towards the end of the first quarter, and freight costs have significantly decreased compared with 2022.
However, there is positive news regarding raw-materials prices, as they have stabilized and are expected to remain stable throughout 2023.
We anticipate stable pricing unless there is an increase in our logistics costs.
We are closely monitoring the EV market to determine the optimal timing for introducing our EV-specific tire. We already manufacture EV tires for the Chinese market and have recently launched them in Europe. Our existing range of sizes can cater to a variety of EV models.
However, a crucial consideration is whether we can develop an EV tire that meets consumers' expectations in terms of mileage performance. There have been reports indicating that EV owners must replace their tires three times more frequently compared with traditional internal combustion engine (ICE) vehicles. If this statistic holds true, consumers may hesitate to invest in an EV tire that does not offer better mileage than a lower-cost traditional all-season tire.
As our competitors hold different views regarding separate EV tires versus all-in-one tires, we are currently in a "wait-and- see mode" to assess market preferences and trends before deciding.
As the manufacturer, we have control over our own destiny. Owning the molds and the plant allows us to maintain a high level of quality control, with all products undergoing a rigorous uniformity check before leaving the facility to ensure exceptional quality. At PCTNA, our sales team actively engages with our dealers throughout the month, seeking opportunities to generate more business for them. We aim to create pull-through opportunities that give consumers a compelling reason to request our tires.
We take pride in offering a wide range of tire sizes, with plans for further expansion. Our last-mile delivery tires stand out in this tier as they are among the few that come with 3PMS (Three-Peak Mountain Snowflake) ratings.
Later this year, we will introduce a long-haul steer tire that is expected to surpass 100,000 miles of reliable performance under normal usage conditions, which is quite exceptional for this tier.
Additionally, we will leverage our sponsorship with USA Pickleball to raise awareness within the large and growing pickleball community, emphasizing the safety and reliability of driving on Fortune Tires when traveling to their pickleball courts.
Yes, the demand for high-quality, value-priced tires for passenger and light trucks remains strong, and I believe it will continue to grow.
As vehicles continue to age, reaching an average of 12.5 years, customers will increasingly seek replacement tires that offer both safety and affordability. This presents a significant opportunity for our company to provide customers with reliable and competitively priced tire options to meet their needs.
Our Fortune Tormenta and Prinx HiCountry tire families are designed to meet the specific needs of the CUV/SUV/LT market. We offer an extensive range of tire options, including highway terrain (H/T), all-terrain (A/T), rugged terrain (R/T), mud terrain (M/T), and a tire specifically designed for last-mile delivery and contractor pickup segments, the Fortune Tormenta LMD and the Prinx HiFleet.
With a total of 168 SKUs available across both brands, our tire offerings have received exceptional market feedback. In particular, the R/T tire has garnered rave reviews for its impressive performance and quiet operation.
Moreover, we have a strong presence in the high-performance and touring segments, with a growing lineup of 114 SKUs. The Fortune Viento and Prinx HiRace lines are tailored for ultra-high-performance applications, while the Fortune Perfectus and Prinx HiCity lines cater to the needs of touring vehicles.
Additionally, we are in the process of developing a 3PMS-rated four-season tire, which is scheduled to be introduced at the SEMA Show later this year, followed by a planned launch in the first quarter of 2024.
Overall, our tire offerings cover a wide range of applications, ensuring that customers have access to high-quality options that meet their specific requirements, whether it's for rugged off-road driving, high-performance scenarios or comfortable touring experiences.
Dealers and customers are increasingly placing importance on tires that meet the 3PMS standard. As the demand for all-season performance and safety grows, having tires that are specifically designed to handle various weather conditions becomes a significant factor in purchasing decisions. We have recognized this trend and responded by introducing 3PMS-rated tires for the last-mile delivery market.
Additionally, we are actively developing a four-season touring tire that will further expand our offerings to meet the evolving needs of customers. By providing tires that meet these standards, we aim to ensure superior performance and safety for drivers, regardless of the weather or road conditions they encounter.
We have a strong belief that the last-mile delivery segment in North America will continue to experience growth. To address this market demand, we have introduced two new products specifically designed for this segment: the Fortune Tormenta LMD and the Prinx Hi Fleet. Both of these tire options are 3PMS-rated, providing optimal performance in various weather conditions.
In addition, we foresee the all-weather segment for passenger and light trucks to continue growing as customers increasingly choose these tires over winter tires, unless they are specifically required.
We are excited to share that on the commercial side, we have significant developments in the pipeline. Our first long-haul steer tire, designed for long-distance trucking, is set to launch. This tire stands out in our tier as it has been developed to exceed 100,000 miles, a remarkable feat. It will be available in three sizes: 295/75R22.5, 11R22.5, and 11R24.5, offering versatility for different trucking needs.
With its advanced design and features, this tire guarantees exceptional performance and durability, meeting the demands of long-haul applications.
The development of technology that combines low rolling resistance with long mileage for the EV market has the potential to be a game-changer in the tire industry. Additionally, the tire market may see a rise in smart technology integration, bringing innovative features to consumer tires.
Our primary focus is to ensure strict compliance with all existing sustainability standards. While I am unable to provide detailed information at this moment, our dedication to meeting these standards highlights our commitment to environmental responsibility.
As our business expands, we are actively seeking to augment our workforce across various departments such as sales, customer service, information technology and logistics.
Simultaneously, we are making significant strides in enhancing our operations in Thailand. We have plans to establish an automated warehousing system in Thailand, which will enable us to deliver products to our customers more efficiently. This initiative is projected to reduce lead times by approximately 15 to 30 days, depending on the final destination.
Additionally, we are exploring options for U.S.-based warehousing through discussions with multiple companies for potential collaboration in a third-party logistics arrangement.
Moreover, we are pleased to share that our plant in Thailand possesses substantial capacity for growth, with the ability to expand by 20% for P/LT and 15% for TBR. Rest assured, meeting the increasing demand for our products is not a concern due to our ample capacity.
For us, we are actively monitoring the developments regarding anti-dumping and countervailing duties. We hope for a reduction in these duties in the near future, as it is essential for us to maintain price competitiveness in the market. Additionally, we recognize the ongoing trend of industry consolidation, and we are prepared to adapt and navigate through any potential changes that may arise.
Moreover, sustainability remains a significant challenge in the industry, and we are fully aware of the environmental impact caused by substances like 6PPD. We recently attended the Smithers Traction conference, where this topic was extensively discussed.
We are dedicated to establishing ourselves as the best in class within our segment, whether it be for Prinx or Fortune. This commitment drives us to continuously improve and deliver exceptional products and services to our customers. We value our direct customers, including our distributors and retailers, and strive to foster strong partnerships with them. By understanding their needs and working closely together, we aim to provide the best possible support and value. As an emerging brand, we are fully committed to the North American market and are invested in its long-term growth and success.
We are committed to ongoing product innovation and continuous improvement across our product lines. By introducing new products and enhancing our current offerings, we aim to meet the evolving needs of our customers and provide them with high-quality tire options.
Furthermore, we are proud to be the official tire sponsor of USA Pickleball (USAP) under the Fortune brand. This partnership brings exciting synergy between an emerging sport and our emerging brand. With millions of pickleball enthusiasts across the country, we see a great opportunity to increase brand exposure and engage with this passionate community. We are planning fun promotions that will encourage pickleball enthusiasts to consider Fortune tires for their vehicles.
In addition, we are anticipating the establishment of a partnership for the Prinx brand in the near future. Our focus will be on increasing brand exposure and raising awareness of the Prinx brand among tire consumers.
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