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High-Stakes Niche: Industrial Tires Can Offer High Margins and Opportunity, But at a Cost

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In the simplest of terms, if U.S. factories are working at or near capacity, warehouses should be busy and the market for forklift or towmotor tires should be strong. To that point, the National Association of Manufacturers reports that the manufacturing economy is generally expanding, and manufacturing employment is up by 12,000 jobs as of October 2005. Although modest in tone, the economy, at least, appears to be growing.

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So, too, is the market for industrial tires – specifically for forklifts and towmotors. There are roughly 400,000 forklifts in operation right now in the U.S. alone. China and Europe are also major forklift tire markets. Those in the business of making tires for these vehicles say the market is a commodity one, driven primarily by price, but quite specialized.

“Still, we see more and more traditional tire dealers getting inquiries from potential forklift tire customers,” says Steve Richardson, a regional manager for Duro Tire & Wheel. “Tire dealers are being forced into finding sources for these tires. Because forklift tires are generally twice as expensive as passenger tires, the good news for dealers is that it is a very profitable incremental business with a built-in margin as high as 30% to 40% a tire.”

Operating in what many term a “flat” market is always difficult, but Carlisle Tire & Wheel Co. says it’s moving ahead with U.S.-made forklift tires. “We sell on value,” says Jeff Waechter with Carlisle, “not on price as with others. We know quality is measured by longevity and hours of use. That helps explain why our most expensive tire, the Premium Wide Trac, is also our best seller.”

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In general, this is an OE-driven market, with forklift tires accounting for about 15% of the total industrial tire market. Breaking that down further shows that about 65% of what’s out there right now are solid tires, with pneumatics holding down 35%.

Forklift tires are either press-on (solid) or standard (pneumatic). The pneumatic forklift tire is mounted pretty much the same way as a passenger tire, while the press-on tire requires a special press to mount the tire on the rim. Solids are long lasting and work well indoors or in light outdoor duty, while pneumatics often see more outdoor use due to their ability to swallow up the terrain.

“What really makes this market interesting is that being successful in it depends on where your business is located,” says Richardson. “Price is king, margins can be very high, but if you have a big demand in a rural area, you’ll enjoy a better margin than the dealer operating in a heavily populated area where competition is tough.”

Another Option

“We are supporting more forklift tire business than at any time since 1979,” says Denny Barton, customer service sales manager for Ohio Materials Handling, based in Northeast Ohio. “Of course, this is a highly specialized business, and we’ve been at it a long time. We’re not surprised that our business is growing, despite increasing competition.

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“Like any other segment of the tire business, our customers depend on us to provide service when and where they need it,” he says. “That’s the kind of talk tire dealers are used to, but in the matter of forklift tires, the need for highly skilled labor plus major investments in equipment and training have left some tire dealers high and dry.

“In a sense, I’m a middle man,” says Barton. “I’m working for a company that, in fact, is in competition with traditional independent tire dealers. Even though I sell forklifts, I sell, install and service Trelleborg and Monarch forklift tires.” What does that mean? “It means that if a tire dealer wants me to service an industrial account, we can reach an agreement about how much I make and how much he makes,” says Barton. “It’s a win for me, and it’s a win for him. I’m in a specialized business, and I support tire dealers.”

Barton’s pitch is more than clear. “Getting into the press-on forklift tire business is going to cost at least $100,000,” he says. “That includes the press, a vehicle that transports the press to an on-site destination, rings, plates and a carefully trained expert who knows what he’s doing. We have the equipment so we can keep a tire dealer in the industrial tire game.

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“Currently, the most popular set up we see is the cushion press-on tire. Basically, this is a steel ring with rubber bonded onto it. Some 65% to 70% of all forklift users prefer this tire format. One of the most popular sizes we see is the 21x7x15 with 21 inches being the outside diameter, 7 inches being the width and 15 being the rim size that the tire must be pressed onto.

“A hot item right now is the solid/pneumatic profile press-on wheel. It provides the same soft ride as a pneumatic tire yet is as tough as a solid tire. It combines the best of both worlds,” he says.

Another trend Barton sees is the non-marking forklift tire, a popular item for those companies engaged in food service and/or technical business. “For these customers, a clean fork truck and clean tires can make the difference between signing a major contract or losing one.”

Proceed With Caution

Barton says that entering the forklift tire business should not be taken lightly. “It would be better to form a business arrangement with an experienced forklift tire installer rather than spend the money to buy into the market.

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“Even if a tire dealer elects to jump into the business with a pickup truck and a tow-a-long tire press, it’s going to be expensive. The truck alone will cost $25,000, plus the cost of a press, which can run up to $20,000. Then, there’s the matter of a hiring a trained expert to perform the service calls. Believe me, training someone for this job isn’t something that can be taught in a seminar.

“The person a dealer hires must be ready for just about anything. He may run into a customer with a 35-year-old towmotor. The first problem is: How do you get the tire off such an old vehicle? If you ruin the tire and wheel, or fail to press the new tire back on properly, you’ve just ruined a tire and wheel. Just like that, you can be in the hole for $600 to $700, and your customer is still down.

“That’s why I suggest that an independent tire dealer simply ‘sub’ out the job. The only other way to enter the business is if the tire dealer has the luxury to wait on ROI.”

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Barton has seen dealers get in and out of the business several times. “That tells me it isn’t easy. The better idea is for me to bill a tire dealer, and the tire dealer can bill the customer. It’s clean, the work is done professionally, and if the dealer has a commercial contract with that customer, he keeps the competition out of his backyard. We aren’t interested in that kind of business; we’ll stick with what we know best.”

The forklift/towmotor market isn’t an easy one to exploit, as you can see. But it can be a pretty consistent one, regardless of the economy. Certainly, new business growth awaits as the industrial sector continues to grow. And there are options to entry.

But, dealers have to be smart to succeed here. Good suppliers and, perhaps, business partners can help smooth the way.

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