CABO SAN LUCAS, Mexico—The long-term trend for U.S. tire shipments is for very slow growth, Kumho Tire USA Inc.'s manager of market intelligence and pricing told dealers attending the company's annual dealer meeting Dec. 6-10 in Cabo San Lucas.
Citing U.S. Tire Manufacturers Association statistics, Steve Ewing said that U.S. tire shipments have been growing at an annual compound rate of about 0.5 percent a year from the beginning of 2014 through October 2017.
However, shipments by USTMA member companies—essentially those with a U.S. manufacturing presence—have been growing at a 6.5-percent compound rate annually, Ewing noted, while those of non-member companies have grown only about 0.2 percent, the latter impacted by the import duties imposed on Chinese passenger and light truck tires since 2015.
While tire shipment growth has been slow overall, Ewing pointed out several areas of the U.S. that have had some nice years, notably the Rocky Mountain area where tire shipments are up year-over-year and the South Atlantic, which is up 2.5 percent.
"That's really huge for the South Atlantic, because it is the largest census area in the country in terms of both population and tire shipments," he said.
In his report to Kumho dealers and distributors, Ewing cited several indicators that impact tire demand.
Retail gasoline prices is one of the most important factors to watch, as the price of gas "really determines how much people are willing to drive," he said.
Gas prices in December were about $2.42 a gallon, "which is still really strong," he said. If the price of a gallon of gas tops $3.50, "you are going to see cutbacks on driving, but where they are right now, they are pretty good."
The low cost of gas is reflected in vehicle miles traveled, which increased 1.3 percent throughout 2017. This equates to more than 257 billion additional miles traveled, Ewing said. "So that's pretty good news for the industry."
Consumer confidence also is "really high," he said, noting the Conference Board's consumer index increased in November for the fifth month in a row and remains at a 17-year high.
The University of Michigan's Survey of Consumer Confidence, he added, is 4.7-percent higher than a year ago, despite a drop in November.
"Consumers are looking at this market very favorably right now," Ewing said.
Contributing is the low unemployment rate.
"We have the lowest unemployment rate that we have had in this country that I can remember," Ewing said, noting that a 4.1-percent unemployment rate is considered full employment, "and we are there right now."
Ewing also cited a couple of truck tire indicators, including the American Trucking Associations' truck tonnage index.
"It keeps going up," he said, "and part of that is the Amazon effect. Before, a lot of people were driving to the store for everything they needed. Now a lot of people are ordering from Amazon. That's really, really increased (less-than-truckload) shipping."
In addition, diesel prices remained low at about $2.91 a gallon at the beginning of December.
As for prices in general, the economy is starting to experience inflation, he explained, as one would expect with 4.1-percent unemployment. With inflation running at about 2 percent year-on-year and unemployment at 4 percent, "it's looking good for getting another rate hike."
Gross Domestic Product growth also is looking extremely strong, running at about 3.2 percent year-over-year, he said,
Finally, while light vehicle sales thus far in 2017 are down about 1.5 percent vs. 2016, Ewing said this is not too bad considering 2016 was the all-time sales record for light vehicles.
Within these numbers, light truck sales are up 4.7 percent, led by CUVs, sales of which have grown at a 7-percent clip.
As for tires, Ewing said passenger and light truck tire imports were flat year-to-date through October, while U.S. domestic tire production slipped 4 percent. "So that tells us that manufacturers are starting to draw down inventory a little bit," he said.
"Kumho is doing the opposite," he added, "which is why we have really nice fill rates right now,... but the overall industry seems to be lowering inventory."
Thailand leads importing nations with shipments of passenger and light truck tires to the U.S. up about 27 percent for the year through October, with most of that increase coming at the expense of China, which has seen its tire exports to the U.S. fall nearly 37 percent so far this year, Ewing said.
Truck and bus tire imports also are down about 3.3 percent through October, with U.S. production of these products flat. Imports from Thailand, Japan and South Korea have seen strong growth, while shipments of TBR tires from China are down about 20 percent.
Looking at U.S. passenger and light truck tire shipments through October, Ewing said the trend toward larger sizes continues.
This year alone shipments of 16-inch and smaller consumer tires fell 8.3 percent through October, while those with 18-inch and larger rim diameters are up 11.7 percent. This shift to larger sizes is following the lead of the original equipment market, he said.
Shipments of 16-inch and smaller passenger and light truck tires have slipped to 43 percent of the overall market from 47 percent last year, he said.
Another continuing trend is the shift to higher tire speed ratings.
The number of H- and V-rated performance tires is shrinking, he said, while T-rated performance tires now are "almost nothing" and cosmetic performance tires even less.
Most of the decline in H- and V-rated performance tires has been replaced by growth in touring tires, he said, shipments of which are increasing by double-digits in H, V, W and higher speed ratings.
In light truck tires, shipments of highway-terrain tires are up about 3 percent so far this year following growth in the CUV market, all-terrain tires have declined by 8 percent, mud-terrain tires are flat and commercial LT tire shipments are down slightly.
As for truck and bus tire shipments, this category is having a "very strong" year with growth up about 6.6 percent, Ewing said.