Will the situation at ports be resolved anytime soon?
RB: With the majority of our products for the U.S. and Canada coming through imports, the container debacle has had a huge impact on SRNA. Our timetable from production order to delivery stretched from a three-month window to five months or longer. This delayed arrival impacted the timing of meeting seasonal product demand (like winter product) and season specific markets (like Canada).
From information we have, the forecast projects improvement beginning after May and improving gradually through the end of the year.
What are some of the pleasant surprises you are seeing in the industry?
RB: Industry volume rebound is in every product segment. The business rebound can be seen in passenger, light truck, medium truck and motorcycle tire markets. The sell-in and sell-out rate in every segment is increasing and Miles driven is finally approaching pre-pandemic levels from March! Even with gas prices increasing and new and used vehicle purchase prices soaring, consumers are returning to driving.How will the Commerce Department ruling on antidumping duties on passenger and light truck tires made in Thailand, South Korea, Taiwan and Vietnam affect the market?
RB: We have already seen price increases implemented from all levels of the industry. These increases were also taken by brands not effected by tariffs, raising the prices in the overall tire market.
Price increases will continue in 2021 as a result of rising raw materials as well as ocean freight cost increases, which are on top of the tariff-related increases that were taken in January.
We are already beginning to see production source relocating based on tariffs, with lower tier product moving from one supplier to another and plant expansion announcements from others to decrease the tariff impact.
For SRNA, we will continue to source product from Thailand and have taken steps to minimize the impact of the antidumping tariffs imposed on SRI. Price increases, re-allocation of current production and future production sourcing are steps currently in the implementation stage.
What kind of trends are you seeing in the marketplace?
RB: Continued retail consolidation, electrification and the CUV trend will all impact our industry in the future. SRNA continues to focus on building a strong distribution base by improving the retail and wholesale margins we can provide with our brands.
Our FAST team is being expanded to provide face-to-face contact with associate dealers to build a stronger distribution network for our brand. Strong management of our MAP price and careful watch of our wholesale price in the market have improved the margins for dealers on the Falken brand.
We are investing heavily in production equipment and capability to expand 18-inch and larger rim diameters for PC/LT to meet the growing demand for CUV and LTR product. Autonomous and electric vehicle growth will demand more from tire technology.
What sector offers the most growth potential?
RB: Crossovers continue to be one of the fastest growing segments. According the IHS Markit Light Vehicle Sales Forecast, more than 9 million new crossovers will be sold in 2024, compared to just 5 million passenger cars that same year.
Falken has answered the demand by developing two tires specifically for the modern CUV: the Wildpeak A/T Trail and the Ziex CT60 All-Season. Both tires are designed specifically to match a crossover's unibody platform and higher center of gravity and provide improved handling, superior braking performance and increased tread life.
Do you expect to roll out any additional products in 2021?
RB: We have several new products as well as size expansions that will be rolled out in the second half of 2021 and into the first half of 2022. The Wildpeak R/T will bring our Wildpeak All-Terrain lineup to full speed with an ultra-aggressive, large tread block offering in large diameter sizes designed for off-road use and lifted trucks. New UHP offerings in both summer and all-season categories will also be added.
Size expansions will bring even more sizes to the Wildpeak A/T3W, Wildpeak M/T and WinterPeak FICE product lines in 2021/2022.
What technology will be a game- changer?
RS: SRI has been investing heavily into our proprietary "advanced 4D nano design tire materials development technology." With this new technology, our aim is to develop materials that will simultaneously improve fuel efficiency, vgrip and wear resistance. To advance our development in this new technology, we have been granted one of the first corporate slots to begin utilizing the Fugaku Supercomputer.
What has been the overriding factor in price increases?
RB: The overriding factor has been cost increases. We have absorbed increases in ocean freight and raw materials as well as tariffs. The impact of the pandemic and the resulting rebound as markets reopened increased demand for importing goods into the U.S.
A lack of available container space on ships and a shortage of shipping containers themselves has driven the cost of shipping a container to the U.S. up by as much as double the cost.
Raw-material prices are also on the rise and are expected to continue to climb through 2021. The tariff increases has also had a major impact on costs for importers.
Do you expect any major investments in the next six months or year?
RS: As mentioned, we are making significant investments into our U.S. manufacturing base, which will double our capacity for passenger and light truck products, and we will continue to invest in our field sales force, which will allow us to better communicate directly with our customers. As far as our distribution facilities are concerned, we are already well positioned with what we have today.
In one of our last dealer forums, it was reported that development of an associate brand, particularly for light trucks, has been pushed down the road.
When can dealers expect in the second half?
RS: SRNA currently markets the Ohtsu brand as an associate brand. As demand has increased for the Falken brand, our current production capacity is being focused on meeting the Falken demand.
As a result, the available capacity for the associate brand is limited. We will continue to market the Ohtsu brand; however the supply in some product segments will be limited, such as light truck.