Another domino has fallen because of the seemingly endless reign of high oil prices: Tire sales are sliding downward. But at least this particular evil effect of $75 a barrel oil will have an end.
The high cost of oil-caused largely by huge demand in China and the Far East, besides the developed world, and the never-ending crises in the Middle East and other oil-producing regions-hits all companies in the rubber industry. If it isn't the cost of oil-based materials, it's the higher expense of transportation, of utilities, of just about everything.
Now that gasoline prices, the most visible manifestation of high oil costs, are hovering around or over $3 a gallon, consumers are responding true to form-they cut back. Because American drivers show little interest in reducing their time behind the wheel, they cut back in other ways, namely automobile maintenance and, in particular, buying tires.
The bloom is off the last forecast from the Rubber Manufacturers Association for tire shipments for 2006. The group's consensus was that shipments would rise a modest 1 percent this year, with growth in the aftermarket and a 2-percent decline in original equipment deliveries. Instead, business is down-about 5 percent according to one report, as much as 7 percent according to Goodyear.
The forecast now is that the slowdown in replacement tire sales will continue through the rest of year, and the previously predicted falloff in OE shipments will take place.
Here's the second half of the forecast, the not-so-bad part: Aftermarket tire shipments will begin to rise, eventually. Consumers can put off buying new rubber for awhile, but ultimately they have no choice but to head to the tire store.
Pent-up demand will mean more sales and better days ahead for the tire industry. A decrease in the cost of oil-based materials-that's another story. Pray for a quiet hurricane season.