While inflation is slowly falling, we’re not out of the woods yet. Consumers are still looking to save as inflation hit a high last summer thanks to pandemic supply chain hardships. If price-conscious customers or car maintenance delayers are coming into your shop, Continental Tire the Americas wants dealers to know it has a solution for you to help them.
During the company’s GOLD Dealer Meeting in sunny Playa Mujeres, Mexico in March, the company piggybacked on its new “Smart Choice for Tires” slogan and is offering promotions to dealers to help their financially strapped customers. In addition, Continental reiterated its EV tire strategy to dealers, as tire choices for these vehicles are multiplying in the market.
Tire Review sat down with executives from Continental Tire the Americas to dig deep into these topics and more as companies across the industry are recovering from pandemic challenges.
Maddie Winer, Editor of Tire Review: We heard from a lot of tire manufacturers that Q3, Q4 were soft last year. What have you seen in terms of demand in Q1 and what do you hope to see as we head into the rest of the year?
Bill Caldwell, executive vice president of sales: I think there’s a lot of effort trying to slow things down, including inflation… It’s a headwind. We start to see that from a demand signal. This time last year was still pretty heavy. Customers were trying to rebuild inventories, fighting to get more stable because of the supply situation.
The whole first half of last year was really heavy on rebuilding inventory. The imports started coming in. Ports freed up. There was this flood of products coming in and distributors rebuilding inventories. In the second half, I think you saw more of a normal situation where you sell to a consumer and you’re replenishing.
MW: There’s still inflation in the market today and still some supply challenges. What are you all seeing?
Caldwell: [There’s] supply challenges in spots. I think we’re still on this recovery pathway in general. I would say that for us, as well as the industry. We’re trying to leverage our global network of plants versus our local US plants to come out of that hole we were in. We have a strong supply coming from Europe now, and the US plants are recovering. Although, like everything else in the US right now, employment is a challenge. Getting the plants back at their optimal output is a work in process, but steadily improving.
MW: So, are you all comparing this year, 2023, to 2019 at all or is there any normalcy anymore?
Caldwell: I think it’s been really natural for our process to try to get rid of the anomalies and 2019 is a natural reference point for everyone. I’m hoping we turn the page on that, personally.
I think the market numbers for last year approached 2019. I don’t think as an industry, we’re back to that. But there are unique events driving things. I expect this to be the first normalized year where we don’t have some strange anomaly-driving things. We’re back to normal business, competing and more normal behavior throughout the supply chain.
We know budgets are tight, right? With the inflation, I think you’ve seen a focus of ours right now is the General brand because we realized that. What we hear from distributors and dealers is that buying behavior is going down to Tier 2, Tier 3. You might see the same units, but they might be coming in at a different price point in the market. We’re looking at our General brand becoming more important for us if buying behavior is more financially constrained. We want to make sure we have a good value proposition out there in our Tier 2 offering.
MW: You all are offering stacked promotions throughout the year, especially around the Continental Tire credit card, to incentivize dealers to sign customers up for it. From March to August, Continental is offering a double rebate if consumers pay for their tires with the credit card. Explain the push behind the Continental Tire credit card this year.
Chris Charity, vice president of sales: I think as we go into 2023, we just want to make sure we’ve got the right tools for the dealer to execute a sale. So having this credit option, having the stacked promotions and being able to support that dealer to take care of the consumer, that’s why we’re having that credit option and the six months to start paying that off.
Travis Roffler, director of marketing: We [consumers] used to make a $400 tire purchase. I think at that level, people are just like, “Oh, put something on it.” Now tires are a $1,000 purchase on average for CUVs or SUVs, and I think people are going, “Maybe I want to do a little more research.” We found in our research for [Continental’s new slogan] “The Smart Choice in Tires” is that people want to know more.
That’s the value of the credit card. Now that it’s a $1,000-plus purchase for tires, people can pay $200 over six months. They can’t shell out $1,500 or $1,200 now. I think that’s why, in this economy, the smart choice is to get a credit card that is willing to help you put a quality tire on a car and offer you some time to pay for it.
MW: I’ve seen members of your team at different industry events presenting on tires for EVs. It seems like you all are coming out pretty hard with your strategy around EVs this year.
Roffler: Our message is that we’re EV-ready. We’ve talked about the five parameters of EVs: noise, weight, range, torque and mileage. They’re all tire conflicts, but our point is that they’re not any more of a [performance] conflict than the tire has always had.
What we’re trying to communicate to our dealers and the industry is that there’s not some special tire that needs to be created to cover EVs. All of our tires, replacement or OE, will all be EV-ready. You have to have a conversation about qualifying the customer, “What are you looking for?” Ultimately, it doesn’t matter how the car accelerates forward. It just matters how we handle the load. That’s what we’re trying to tell the dealers—just make sure the load is proper for the vehicle that you’re putting it on and then you can have the conversation about performance versus range.
The other part of this is that the tire’s maximum effect [on an EV] in worst-case conditions is 10% on range or 30 miles. Turning the heat on is going to cost you 40% in range. That’s why you have to have a conversation about qualifying the customer. “What are you looking for?”
Be honest with them and tell them, “I have a product to service your needs. Tell me what you want.” If it’s all about range and you’re using your car as a daily driver, you don’t care how the car handles, we’re going to put an OE tire back on it that gets great rolling resistance and great range. You want a tire to perform? We’ve got a [replacement] tire for that, too.
The capabilities we’ve had with original equipment to design and develop these tires are huge… Rolling resistance has always been important, even with ICE vehicles because of CAFE standards. We’ve always had corporate average fuel economy (CAFE) standards with our OEs. We’ve worked with all car manufacturers worldwide to drive rolling resistance.
Caldwell: We are totally capable of coming out with an EV-unique product line. We just don’t believe it will add value versus what we already have in the portfolio to offer a customer.
When we talk to dealers, we try to educate them. An EV tire doesn’t change any of the tradeoffs. We can make a tire that will give you tons of range and you’ll trade boff other things. Everybody can do that. Our dealers aren’t looking for more complications in their business.
Roffler: We’re trying to arm them with the information so that they can have knowledgeable conversations with their customers when they come in and not be afraid.