AKRON — At first glance, the U.S. consumer tire aftermarket displayed moderate strength last year, with replacement passenger and light truck tire shipments up 2.2% and 2.5%, respectively, over 2018.
What comes as a surprise, though, is that U.S.-based tire manufacturers — despite billions of dollars of investment in new and expanded capacities over the past several years — didn't seem to benefit from the aftermarket growth, according to Tire Business' analysis of new market data.
Passenger tire production by U.S. manufacturers fell 3%, while imports of passenger tires rose 3.8%, according to the latest data from the U.S. Tire Manufacturers Association (USTMA) and the Department of Commerce.
Car tire imports rose overall despite a 66.7% drop in shipments from China, Commerce Department data show, dropping China out of the 10 nations of origin for imports last year — for the first time since the 1990s.
Thailand has assumed the role as the No. 1 source of imported tires, shipping 37.3 million units last to the U.S., a 10.2% jump over 2018. South Korea, Mexico, Indonesia and Canada round out the top five.
The USTMA didn't offer an explanation for the production decline — which comes despite the opening of new car tire plants in recent years by Giti Tire Group, Hankook Tire Co. Ltd., Kumho Tire Co. Inc. and Nokian Tyres P.L.C. — but there are a few mitigating circumstances that help explain the situation.
Most of the established U.S.-based tire producers have been shifting their passenger car emphasis to larger-sized tires — those with 17-inch and larger rim diameters — a change that can reduce an individual factory's unit-output capacity owing to the need for larger molds and longer cure times.
One specific situation to consider: Goodyear has cut production at its 90-year-old factory in Gadsden, Ala., by more than 10,000 units a day while increasing output by a smaller amount at its Fayetteville, N.C., plant and turning to a new plant in Mexico for some supply as well.
Car tire imports from Mexico increased nearly 19% — or 2.2 million units — last year over 2018, Commerce Department data show. Besides Goodyear, Bridgestone Americas, Cooper Tire & Rubber Co., Continental Tire the Americas, JK Tyre Industry and Michelin Group have factories in Mexico.
In the light truck tire category, aftermarket shipments rose 2.5% to 32.5 million, and both production and imports increased by more than 5% to 26.7 million units.
In the medium truck/bus tire category, reported aftermarket shipments fell 13.3% to 18.9 million units, but the decline was skewed by abnormally high shipments in 2018 as importers sought to stockpile Chinese-sourced tires ahead of the imposition of elevated import duties by the U.S. government on Chinese products.
In 2018, imports of truck/bus tires from China shot up 42% to a record 9.22 million units then sank precipitously (65.4%) this past year to 3.19 million units, the lowest level in years.
Wholesalers report the additional 3 million-plus tires imported in the final months of 2018 have for the most part now been sold, restoring the market to a more "normal" supply/demand situation.
U.S. truck/bus tire production rose 2.1% last year to 14.7 million units but new capacity being built by Continental in Mississippi should help the overall supply situation.
Overall truck/bus imports last fell 13.5% last year to 14.8 million units as increased imports from Thailand (up 89%), Vietnam (up 108.1%), South Korea (57.6%), Spain (50.2%) and India (156.1%) couldn't offset the sheer volume of tires not shipped from China.
In Canada, by contrast, aftermarket shipments fell across the board, a development that the Tire and Rubber Association of Canada (TRAC) attributed to weaker winter shipments during calendar year 2019 (reflecting higher-than-normal inventory levels from 2018) and in the commercial categories to weaker economic activity in the western provinces related to the forestry and gas-and-oil sectors.
On the original equipment side, car tire shipments sank 5.6% last year as production of new cars, SUVs, light trucks, etc. fell as well. The decline, to 44.5 million units, followed a 4.2% increase in 2018 over 2017.
Sales of new cars, SUVs and light trucks/vans in the U.S. and Canada fell year fell 1.2% and 5.6%, respectively, according to Automotive News data. U.S. sales fell to 17.1 million units while in Canada they dipped to 1.92 million units.
Of the 17.1 million vehicles sold in the U.S., 4.04 million — or 23.7% — were imported from outside of North America, with Japan accounting for nearly half of the imports. These imports represent 16.2 million tires not accounted for in the USTMA OE data.
Taking into account the makeup of the car imports, the Japanese tire makers Bridgestone Corp., Sumitomo Rubber Industries Ltd., Toyo Tire Corp. and Yokohama Rubber Co. Ltd. enjoy measurably higher OE market shares than those shown in the Market Data Book.
The rest of the 2019 car imports came from Europe (1.18 million units), South Korea (817,914 units) and "other" countries (124,942), the data show.
Sales of cars built in North America dropped 1% to 13.1 million units.
In terms of channel distribution, national chains — those with more than 40 outlets in three or more geographical regions — continued to loom large, accounting for 41% of both passenger and light truck tire shipments from manufacturers, according to USTMA data.
Local dealerships — independents with fewer than 10 outlets — accounted for 16% and 27% of passenger and LT tire shipments, respectively, ahead of regional dealerships (10 to 40 outlets in at least two regions), which represented 15% and 22%, respectively.
The USTMA data showed one major shift — the relevant strength of tire company retail outlets, which shrank to 6% and 4%, respectively, from 12% and 11% a year ago.
This appears to be a data "correction" from earlier reports, rather than a single-year shift of this magnitude, especially since Bridgestone Americas and Goodyear — the two tire makers with company-owned chains — didn't downsize their respective networks to any degree in 2019.
Mergers/acquisitions
2019 saw its share of activity on the mergers-and-acquisition front, with Monro Inc. and Bridgestone Americas/GCR Tires the key players in the retail and commercial sectors, respectively.
Monro added 102 retail locations throughout the country in a dozen separate deals, spending $100-plus million to acquire businesses with more than $120 million in annualized sales potential. The largest of these deals was the purchase of 40 Certified Tire & Service Centers retail locations and one distribution center in California in May 2019.
Bridgestone was equally active in terms of outlets that changed hands, except it was the seller, not the buyer.
Bridgestone divested 73 GCR commercial locations and a dozen Bandag-system retread plants in four transactions. As a result, Bridgestone has winnowed down the size of the GCR network to roughly 90 locations, down from 200-plus just a few years ago.
The M&A wave continued into 2020, with Mavis Tire Supply striking a deal to take over 112 National Tire & Battery locations in four major metro markets from TBC Corp. and the family shareholders of Les Schwab Tire disclosing plans to find a buyer for the business, considered the sixth largest dealership in the U.S.
North American market
On the sales side, the major tire companies generated mixed results, both in unit volume and dollar revenue.
Based on organic growth and the addition of revenue from the mid-2018 acquisition of off-road and industrial tire maker Camso Inc., Michelin North America Inc. took over as the largest tire maker in North America with an estimated $9.5 billion in sales.
Michelin moved ahead of Bridgestone Americas, which had been No. 1 in sales for the past five years. Goodyear remained No. 3 with tire-related sales in North America of $6.15 billion. Unit sales for Goodyear's Americas business unit were on par with 2018, although the company noted aftermarket sales were up 2% and OE sales were down 18%.
Other nuggets gleaned from the 2020 Market Data Book include:
• Demand for high-performance tires in the U.S. continues to increase in the replacement market, where shipments of tires H-rated and higher exceeded 100 million units for the first time and now represent 46.7% percent of aftermarket shipments, up 5.2% from 2018 and nearly a third versus 2015.
The OE share fell slightly, to 54.9% of overall shipments, the USTMA data revealed, and has now plateaued at the 55%-57% level for the past four years.
The shift at OE also is reflected in the breakdown of OE tire sizes, where the 10 most popular sizes now are all 17-, 18-, 19- or 20-inch rim diameter sizes. Together they account for nearly 33% of all OE shipments.
• Goodyear remained the No. 1 supplier of OE consumer tires last year, outfitting an estimated 24% percent of the 17 million cars, SUVs/CUVs and light trucks built in North America in 2018 with its Goodyear and Dunlop brands.
Michelin North America was No. 2 with its Michelin and BFGoodrich brands, ahead of Bridgestone Americas (Bridgestone and Firestone brands) and Continental Tire the Americas L.L.C. (Continental and General brands).
Increasingly the auto OEMs are spec'ing brands other than the traditional major brands, a trend reflected in the list of tire companies supplying the car makers, which now includes brands such as Cooper, Falken, Hankook, Kumho and Nexen.
Also making strides with OE manufacturers is Sumitomo Rubber North America, which now has responsibility for supplying both Dunlop and Falken-brand OE tires to the U.S. assembly plants of the Japanese car markers — Honda North America Inc., Mazda (North America) Inc., Nissan North America Inc., Subaru of America and Toyota Motor Mfg.
• South Carolina remains the No. 1 tire-producing state with estimated daily tire production capacity of roughly 133,000 units. Oklahoma holds the No. 2 spot at 88,000 units, ahead of North Carolina at 74,000.
With the opening last year of Nokian Tyre's plant in Dayton, Tenn., and the ramping up of capacity at Hankook Tire's factory in Clarksville, Tenn., the Volunteer state is poised to challenge the Tar Heel state in the coming years for that No. 3 spot.
• U.S. shipments of winter/traction tires rebounded slightly last year after a three-year skid, accounting for 2.1% all replacement car tire shipments. By contrast, winter tires represent more than 35% of aftermarket car tire shipments in Canada.
• Vehicle registrations in the U.S. increased 0.2% in 2018 (the most recent year for which data are available) to 17.6 million vehicles, including 11.7 million light trucks and 5.4 million cars.
In terms of vehicles in operation (VIO), ACA data show the number of cars registered throughout the U.S. fell 0.6% to 118.7 million while the number of light trucks registered grew 4.5% to 159.4 million.
• Hourly wages for auto technicians and non-supervisory tire dealership employees rose in 2018 to $18.42 and $15.90 an hour, respectively, according to U.S. Bureau of Labor Statistics data. For auto technicians, this was the fifth straight year of increase.
The tire dealership wage compares favorably with that paid at auto parts/accessories stores ($16.80) and is considerably better than that paid at auto repair/maintenance facilities ($11.70) but pales in comparison with that paid at vehicle dealerships ($21.80), the data show.
The Market Data Book also contains benchmarking information on the automotive service sector and summaries of Tire Business' retail, commercial and retread rankings from 2018.
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