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.