Magazine for the professional tire industry
Issue link: https://mtd.epubxp.com/i/449261
MTD January 2015 Industry analysis MTD: What's the biggest story of the year in commercial tires? Mitchell: The biggest story of the year in the U.S. has undoubtedly been the consistent and robust growth the channel has witnessed all year. Shipments in the OE and replacement channels were up approximately 17% and 10% through November 2014, respectively. Tis growth has also been resilient as the market grew every month. On the fip side, the strong performance creates a string of difcult comparisons for 2015, which will likely restrict growth trends. MTD: Is there something tire dealers are doing today they won't be doing by the end of 2020? Mitchell: I do not think there is any service or work being performed today that will completely go away by the end of the decade. I would imagine tire dealers will perform fewer and fewer oil changes in the coming years as a greater percentage of the nation's light vehicle feet will be comprised of electric vehicles, and more and more of the non-electric cars and light trucks will use synthetic oil, which allows for longer intervals between oil changes. As a result, installers will need to come up with new ways to drive trafc to their establishments. MTD: Michelin North America Inc.'s Tweel plant is now open in South Carolina. How big is the Tweel today, and how big will it be fve years from now? Mitchell: Te technology behind Michelin's Tweel is really amazing. Despite speculation this non-pneumatic tire/wheel assembly could serve as a viable replacement for pneumatic tires in many applications, it appears the product will only serve a more limited end market for the foreseeable future, including skid-steers and other small industrial vehicles. I suppose one could envision a world where the Tweel could be on passenger cars and light trucks, however it would require more research and testing by Michelin, and consumers would have to buy into the aesthetics. MTD: Which segment of the tire industry will see the most growth in 2015? Mitchell: Domestically speaking, the commercial truck tire market was very strong in 2014, which inherently creates a string of difcult comparisons for 2015 that will probably restrict growth trends. I expect the fundamentals in the OTR market will improve slightly in 2015, but demand will likely remain fairly lackluster. Based on these projections and the relief consumers will get from falling prices at the pumps throughout 2015, I think the safest bet is to assume the strongest shipments will be in the passenger and light truck segments. Te one wild card here is any pressure from destocking the strategic build in inventory of Chinese replacement tires could create more of a headwind than I currently estimate. MTD: How's the auto service repair business? What economic factors do you expect to afect those profts? Mitchell: I think fundamentals are fairly healthy in the auto service repair business. Trafc and the average ticket expanded in 2014, and the growth should continue in 2015. Cost pressures are fairly benign, the average age of a passenger vehicle continues to increase, and the car parc is starting to expand at more normalized growth rates afer a few years of stagnation following the Great Recession. Te uptick in miles driven trends and the increased disposable income resulting from the ongoing slide in gasoline prices will also provide a modest tailwind to demand in 2015. MTD: Tanks again for your insights, Nick. ■ Manufacturers fail in marketing Despite the money spent, customers don't know anything about tires Tire manufacturers all spend money marketing their brands. They advertise. They promote every major sport and sponsor events from college football bowl games to professional hockey. Plus, there's racing, a world that spins on the companies' products. But this doesn't mean sports fans, or customers in general, are knowledge- able about tires, says Nick Mitchell, senior vice president and research analyst at Northcoast Research Hold- ings LLC. "Consumers are usually forced to fork over a pretty decent chunk of change when they purchase four new tires," Mitchell says. "Unfortunately, most buyers have no idea what type of tires they want when they begin the buying process, which, in my opinion, is a sign the tire marketing campaigns are not very effective." So what does work? Mitchell says safety campaigns are often the most productive. "I think the most successful market- ing and advertising strategies focus on highlighting the safety benefts that can be harvested from investing in a mid-tier to premium tire, and educating the consumer on the pros and cons of each type of passenger and light truck tire available in the market," Mitchell says. "Unfortunately, I do not think the manufacturers have done a good job on this front." Cue the tire dealers to step in to bridge the gap. Mitchell says they "play a pivotal role" in the selection process. " I would imagine tire dealers will perform fewer and fewer oil changes in the coming years..." 24