Magazine for the professional tire industry
Issue link: https://mtd.epubxp.com/i/630954
19 www.moderntiredealer.com 2014 without any problem despite the "pricing power story" never really geting of the ground. Tat said, given the warm temperatures and the lack of snowfall across the Great Lakes, Northeast, and Mid-Atlantic regions in the fourth quarter of 2015, we expect channel inventory of snow tires will be higher than ideal coming out of the frst quarter of the year, which could present a minor obstacle to sell-in volumes in the frst half of 2016. MTD: Afer the tarifs on passenger tires made in China were approved, most expectations were for prices to increase like they did in 2009 afer the previous tarifs were imposed. What happened? Mitchell: Despite the fact the U.S. Department of Com- merce fnalized its anti-dumping and countervailing duties covering passenger and light truck tires produced in China in the middle of 2015, most players in the North American tire industry we spoke with noted they never saw a lasting beneft from the trade measures. In our opinion, the weakness in raw material prices was the primary culprit for the fact the initial increases to base prices on Tier 2 and Tier 3 products were rolled back or ofset with promotions, including more aggressive volume incentives. Tat said, we are surprised the pricing terms for product coming from Thailand, Indonesia and Vietnam are very aggressive. It sounds as if this phenomenon is being driven by Chinese suppliers still quoting prices that are on par with those seen prior to the implementation of the tarif. MTD: How much are tire dealers depending on tire sales for their botom line? Has there been a shif during 2015? Do you expect this to change in 2016? Mitchell: Tire sales are as relevant today to the botom line as they ever were. Te category remains a key trafc and proft driver and is still the best category to forge relationships with customers. Service has become more important over the years, but the proft diference between a well-run dealer and an average dealer lies in how well the tire portion of the sales mix and inventory portfolio are managed. MTD: What's happening with tire production in China? Mitchell: Tire production continues to expand in China despite the new protective trade measures in the U.S. However, we have heard some chater about banks foreclosing on small manufacturers as credit tightened. We expect overall tire production in the country will expand by 5% plus in 2016. MTD: Raw material prices have been low in 2015. When should dealers expect those prices to rise again? Mitchell: Predicating raw material prices is tough, to say the least. Tat said, we think the basket of key raw material prices will be fat to down low-single digits in 2016, driven by the weakness in oil and natural rubber prices. MTD: Oil prices have decreased throughout the year, and that afects raw material costs as well as consumer habits. Who's benefting more, tire manufacturers or consumers? Quik-Link: 800-687-1557 ext. 11109