It looks like this year´s multiple rounds of tire price increases by manufacturers are sticking.
Unlike in the past, when tire makers´ price hikes met with mixed results—some held in the retail market, some were ignored—this year, tire manufacturers have the backing of national news reports on soaring fuel and energy costs and continued skyrocketing raw material costs to support their moves.
Tire dealers seem to empathize with tire makers´ need to offset rising production costs. Meanwhile, consumers are so shocked by escalating prices hovering at nearly $3 per gallon at the gas pump that they apparently aren´t surprised by—or are simply not aware of—the higher prices they´re paying in the tire stores they visit. Many may be postponing vehicle repairs and squeezing the last few miles out of their tires before finally biting the bullet and making a purchase.
Most of the major tire manufacturers announced price increases this summer ranging from 4 to 8 percent on various lines due to rising costs for raw materials, energy and transportation. The consensus is those market conditions probably won´t change for the better anytime soon.
Many dealers said they are passing along the higher prices to consumers because they have to maintain their profit margins.
"We´ve seen initially that some small tire dealerships have to pass it on, and the larger dealerships try to get an advantage of lower prices (in their market). But eventually they have to pass it on," said Roy Littlefield, Tire Industry Association executive vice president.
Tire manufacturers said they simply are trying to offset their own increased raw material expenses. The price increase "is not to improve profitability but to make up for the oil prices," said Steve Weinger, senior vice president of sales and marketing for Toyo Tire (U.S.A.) Corp. "Everybody realizes (the price increase) is a necessity. Tires are still a good value."
The early summer hikes came from Goodyear; Continental Tire North America Inc.; Kumho Tire USA Inc.; Hankook Tire America Corp.; Yokohama Tire Corp.; Michelin North America Inc.; and Toyo. Bridgestone/Firestone raised its prices 5 to 7 percent on passenger and commercial tires at the beginning of the year.
Cooper Tire & Rubber Co. will hike prices 5 percent on all tires in December. Pirelli Tire North America Inc., after raising its prices in June, has announced another increase of 4.5 percent on Dec. 1 on passenger and light truck tires in North America.
In addition to price hikes, some manufacturers said they are taking other approaches to offset increased costs, including improving plant productivity and efficiency.
Some manufacturers declined to predict the future direction of raw material prices. Others have a grim outlook. "We see a continued rise in raw material costs due to the volatility and bullish market for oil and energy, combined with the upswing in global demand for natural rubber," a Cooper Tire spokesperson said.
Riccardi Cichi, Pirelli Tire´s vice president of sales and marketing, said that, in addition to the hurricane damage in the Gulf of Mexico, a raw material shortage has been created by China´s demand for increased amounts of raw materials for its growing manufacturing industry.
The tire makers said they are taking a "wait and see" approach for further tire price increases. Cichi said the tire industry will have reached its limit on price increases when end users stop buying major brand tires and turn to cheaper-priced imported tires.