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December 01, 2020 10:01 AM

Rise in aftermarket tire demand leaves shortages

Bruce Davis
Tire Business
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    Tire Dealer best one-main_i.jpg
    Best One of Indy photo

    The replacement tire market is seeing steady improvements.

    AKRON—As the year winds to a close, tire dealers throughout the U.S. find themselves coping with a growing dichotomy—rising consumer demand versus product shortages and looming price increases.

    According to nearly every market forecast, demand for tires and automotive services is on the rise again after the COVID-19-pandemic-induced collapse in the first half of the year.

    That recovering demand, coupled with the weeks-long shutdown of production at most North American tire factories, has created a shortage of product in most key categories, according to executives with Bridgestone Americas, Cooper Tire & Rubber Co. and Goodyear during recent conference calls.

    In Cooper's third-quarter results call, President and CEO Brad Hughes put customers on notice they would be experiencing product shortages in the fourth quarter and potentially into the new year as Cooper struggled to rebuild inventories following production shutdowns in the first half of the year.

    Richard Kramer, Goodyear chairman, president and CEO, echoed those views in his third-quarter earnings call, saying demand was exceeding both Goodyear's and the industry's expectations. The company is ramping up production, but demand was outrunning that build.

    During Bridgestone's recent 2020 consumer business conference, company executives acknowledged shortages as well, adding Bridgestone is tapping into its global production assets to bring in tires from Asia, Europe and Latin America to help rebuild inventories.

    In a call with Tire Business, Riccardo Cichi, Bridgestone Americas president and chief sales officer in North America, said his firm's research shows dealers are reporting 70-75 percent fill rates, down from the 90 percent most dealers had come to expect in recent years.

    Fill rates range from 50-90 percent, depending on the product category, he said. Bridgestone also is working with its dealers to use the full Bridgestone and Firestone portfolio to find substitutes where possible.

    In many cases, tire sizing in North America is distinct versus other regions, which makes it hard for U.S.-based manufacturers to source key SKUs, especially the larger rim-diameter SUV/CUV sizes, from overseas.

    This market anomaly may help explain why passenger and light truck tire imports from Mexico were up 27 percent and 39 percent, respectively, in the third quarter, according to Department of Commerce data.

    Light truck tire imports overall increased nearly 20 percent, the data shows, while passenger tire imports were down 2 percent from the 2019 quarter.

    Cichi also acknowledged that Bridgestone—and the industry in general—experienced a "flight to value" in the second quarter, as customers shifted to lower-tier brands. The situation has since eased, he noted, but the major brand makers have to be diligent and work with their dealer networks to rebuild brand equity.

    Independent wholesalers contacted by Tire Business, a sister publication of Rubber & Plastics News, confirmed shortages across various sectors, with one saying "some domestics are still playing catch up but import products are rolling in pretty strong from all countries."

    One wholesaler noted that smaller distributors are feeling the supply/demand pinch more than larger ones, who have more product in inventory.

    Some tire makers are looking to increase prices on certain products, while also experiencing some product shortages.

    In addition, the late onset of winter in most regions is alleviating pressure on the winter tire segment, another wholesaler said.

    One wholesaler said it expects the situation to worsen during the next several weeks, particularly in sectors where overseas manufacturers are active, including the specialty trailer segment.

    On the pricing front, entry-level product prices are rising in anticipation of the antidumping/countervailing-duty determination due before year-end on passenger and light truck imports from South Korea, Taiwan, Thailand and Vietnam.

    Exacerbating the situation is a growing shortage of containers in the Far East ahead of the holiday season. Some importers of record are assessing shipping surcharges on orders to secure shipping lanes for product, the wholesaler said.

    The third-quarter import data confirms in part the wholesalers' observations on these specific products and places of origin.

    While passenger tire imports overall were down, the data shows shipments from Taiwan, Thailand and Vietnam all rose during the quarter, by 11.3 percent, 11.4 percent and 16.4 percent, respectively. Imports from South Korea fell 22.4 percent.

    In the light truck tire sector, imports from all four nations jumped by double digits: Taiwan, up 84.5 percent; Vietnam, up 67.9 percent; South Korea, up 21.8 percent; and Thailand, up 16 percent.

    Medium truck/bus tire imports fell 20.6 percent during the quarter, with Vietnam (up 94 percent), India (up 22 percent) and Colombia (up 58.7 percent) the exceptions among the 10 largest countries of origin.

    Among price increases enacted or disclosed in recent weeks:

    • Goodyear is planning to raise prices on all Goodyear- and Dunlop-branded passenger and light truck tires in the U.S. by up to 5 percent, effective Dec. 1.

    Goodyear cited the "changing market dynamics in the industry" for the increases, which it said "reflect the strong value of the Goodyear brands."

    Goodyear last raised consumer tire prices in North America on April 1, boosting prices on Goodyear- and Kelly-brand consumer tires by up to 5 percent.

    • Sumitomo Rubber North America Inc. will raise prices in the U.S. and Canada on Falken- and Ohtsu-brand medium truck tires by up to 6 percent, beginning Dec. 1, and on passenger and light truck tires up to 8 percent, starting Jan. 1.

    The action will include inline adjustments on a per-size basis, SRNA added.

    SRNA last raised prices on Falken-brand tires on March 1, by up to 5 percent.

    The Rancho Cucamonga, Calif.-based company cited several factors for the need to raise prices, including increased costs in both transportation and labor as well as other market factors.

    • Hankook Tire America Corp. plans to raise prices on its lines of commercial truck tires in the U.S. by up to 5 percent on Dec. 1, varying based on SKU.

    The tire maker said the hikes are due to the changing market conditions related to production and shipping costs.

    Hankook last raised prices on truck/bus tires in the U.S. in April 2019.

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