Magazine for the professional tire industry
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feature Tire dealer watch list for 2014: Labor market conditions, gas prices and tire afordability will afect the health of the tire market, says analyst By Lori L. Mavrigian W hile tire prices remained calm, there were enough elements stirring the waters to keep the tire industry rocking in 2013. First, there was the proposed purchase of Cooper Tire & Rubber Co. by Apollo Tyres Ltd. Ten there was the food of tires from China following the removal of Tarif 421 in late 2012 (and their efect on the market). And there was anticipation on whether or not customers would fnally release the pent-up demand for tires and auto service while continuing to recover from the recession. For insights into what happened in the tire and automotive service industries in 2013 and what to expect in 2014, Modern Tire Dealer turned again to tire industry analyst Nick Mitchell. Mitchell works for institutional equity research frm Northcoast Research Holdings LLC in Cleveland, Ohio. He joined the company in April 2009 as a senior vice president and equity research analyst. He now covers several segments, including the tire and automotive afermarket. He has received awards from the Wall Street Journal and Financial Times that recognize the performance of his investment recommendations. Mitchell began his fnancial career at McDonald Investments Inc. in Cleveland, where he was an investment consultant within the frm's brokerage division. He holds the Chartered Financial Analyst and Chartered Market Technician designations. MTD: What do you see as the defning moments in the tire industry in 2013? Mitchell: Besides the ongoing drama between Cooper Tire and Apollo, the most notable trend in 2013 was defnitely the food of tires from China. Tis phenomenon clearly drove the improving trend in Rubber Manufacturers Association (RMA) shipments and pressured unit volumes of manufacturers that concentrate on the botom half of the Tier Two category. MTD: Trough your conversations with tire dealers, what is their atitude about business going forward? Mitchell: Most of the retail players who I have spoken with over the last two months noted that they expect light passenger unit volumes to increase 1% to 3% in 2014, which would be a modest step up from the consensus opinion that volumes were fat to up 2% in 2013. Interestingly enough, the dealers who I spoke with at the end of 2012 indicated that volumes would likely range from a 1% decline to a 1% gain in 2013. Tat means the collective mood among the installer community was a litle brighter heading into the holidays in 2013, and I can assure you that everyone has their fngers crossed in hopes 16 Tire industry analyst Nick Mitchell also authors our Tire industry analyst Nick Mitchell also authors our industry analyst Mitchell authors monthly Your Marketplace column (see page 22). that Old Man Winter will bring cold temperatures and lots of snow this year. MTD: In 2013, we continued to see wholesalers geting larger by buying up smaller wholesalers. Will that trend continue? Mitchell: Absolutely. As long as there are folks willing to sell their distribution businesses, there will be a short list of buyers eager to bid on those assets. Large synergies can be gained through scale when it comes to distribution, and ftment proliferation is a growing problem for the smaller, and ofen less well fnancially capitalized, distributors. As a result, I see no end in sight for the consolidation trend. MTD January 2014