AKRON — As the year winds to a close, dealers throughout the U.S. find themselves coping with a growing dichotomy — rising consumer demand versus product shortages and looming price increases.
According to nearly every market forecast, demand for tires and automotive services has stabilized and is on the rise again after the COVID-19 pandemic-induced collapse in the first half of the year.
That recovering demand, coupled with the weeks-long shutdown of production at most North American tire factories, has created a shortage of product in most key categories, according to executives with Bridgestone Americas, Cooper Tire & Rubber Co. and Goodyear during recent conference calls.
- This article appears in the Nov. 23 print edition of Tire Business.
In Cooper's third-quarter results call, President and CEO Brad Hughes put customers on notice they would be experiencing product shortages in the fourth quarter and potentially into the new year as Cooper struggled to rebuild inventories that had been drawn down because of production shutdowns in the first half of the year.
Goodyear Chairman, President and CEO Richard Kramer echoed those views in Goodyear's third-quarter earnings call, saying demand was exceeding both Goodyear's and the industry's expectations. The company started ramping up production in the quarter to replenish depleted stocks, but the rising demand was outrunning that build.
During Bridgestone's recent 2020 consumer business conference, company executives acknowledged their company was experiencing shortages as well, but that the company is tapping into its global production assets to bring in tires from Asia, Europe and Latin America to help rebuild inventories.
In a call with Tire Business, Riccardo Cichi, president and chief sales officer, North America, for Bridgestone Americas, said his firm's research shows dealers are reporting 70% to 75% fill rates, down from the 90% most dealers had come to expect in recent years.
Fill rates range from 50% to 90%, depending on the product category, he said. Bridgestone also is working with its dealers to use the full Bridgestone and Firestone portfolio to find substitutes where possible.
In many cases, however, tire sizing in North America is distinct versus other regions, which makes it hard for U.S.-based manufacturers to source key SKUs, especially the larger rim-diameter SUV/CUV sizes, from overseas.
This market anomaly may help explain why passenger and light truck tire imports from Mexico were up 27% and 39%, respectively, in the third quarter, according to Department of Commerce data.
Light truck tire imports overall increased nearly 20%, the data show, while passenger tire imports were down 2% from the 2019 quarter.
Mr. Cichi also acknowledged that Bridgestone and the industry in general experienced a "flight to value" in the second quarter, as customers who were buying shifted to lower-tier brands. The situation has since eased, he noted, but the major brand makers have to be diligent and work with their dealer networks to rebuild brand equity.
Independent wholesalers contacted by Tire Business confirmed shortages across various sectors, with one saying "some domestic are still playing catch up but import products are rolling in pretty strong from all countries."
One wholesaler noted that smaller distributors are feeling the supply/demand pinch more than larger ones, who have more product in inventory.
In addition, the late onset of winter in most regions is alleviating pressure on the winter tire segment, another wholesaler said.
One wholesaler said it expects the situation to worsen over the next several weeks, particularly in sectors where overseas manufacturers are active, including the specialty trailer segment.
On the pricing front, entry-level product prices are rising in anticipation of the antidumping/countervailing-duty determination due before year-end on passenger and light truck imports from South Korea, Taiwan, Thailand and Vietnam.