The KeyBanc March 2015 Tire Industry Report

The KeyBanc Industry Report

After a lot of churning surrounding the imposition of antidumping and countervailing duties on imported China-produced consumer tires, dealer inventories and manufacturer pricing calmed down in March.

Tire Review and KeyBanc Capital Markets Inc. in Cleveland are working together on a monthly survey of U.S. tire dealers to gauge real-world factors – such as manufacturer tire pricing, supply levels, and tire unit and dollar sales.

Here are some of the findings for March compared to February:

Mar. YoY CONSUMER Units Sold: 6.0% (Feb.: 6.7%)

1Q15 CONSUMER Units Sold: 5.5%

Mar. YoY COMMERCIAL Units Sold: 6.7% (Feb.: 5.9%)

1Q15 COMMERCIAL Units Sold: 5.9%

Mar. CONSUMER Inventory

Too High: 4.3% (Feb.: 64.0%) – 1Q15: 46.0%
Too Low: 5.3% (Feb.: 7.9%) – 1Q15: 6.6%
Just Right: 90.4% (Feb.: 28.1%) – 1Q15: 47.4%

Mar. COMMERCIAL Inventory

Too High: 64.4% (Feb.: 65.7%) – 1Q15: 65.0%
Too Low: 2.2% (Feb.: 4.6%) – 1Q15: 4.3%
Just Right: 33.3% (Feb.: 29.6%) – 1Q15: 30.6%

Mar. Tiremaker CONSUMER Pricing

Normal: 88.3% (Feb.: 90.4%) – 1Q15: 79.7%
Aggressive: 8.5% (Feb.: 7.9%) – 1Q15: 14.9%
Firm: 3.2% (Feb.: 1.8%) –1Q15: 5.4%

Mar. Tiremaker COMMERCIAL Pricing

Normal: 94.5% (Feb.: 80.6%) – 1Q15: 83.8%
Aggressive: 4.4% (Feb.: 17.6%) – 1Q15: 10.5%
Firm: 1.1% (Feb.: 1.9%) – 1Q15: 5.7%

Mar. YoY Service Dollar Sales: Up 2.2% (Feb.: Up 3.8%)

1Q15 Service Dollar Sales: Up 2.0%

Mar. YoY Service Gross Margin: Up 0.2% (Feb.: Up 0.5%)

1Q15 Service Gross Margin: 5.9%: Up 0.2%

Industry Roundup: After a lot of churning surrounding the imposition of antidumping and countervailing duties on imported China-produced consumer tires, dealer inventories and manufacturer pricing calmed down in March. Dealer inventories that were seen as too high in February were just right in March. Dealers remain uncertain with their commercial tires inventories, however, and lean to them being too high for the March period. Pricing in both cases was called “normal” among the vast number of reporting dealers.

After a brutal winter in some parts of the country, it was surprising to see service sales remain depressed in March even as tire sales remained positive.

I believe the most incremental takeaway this month is the normalization of consumer inventory levels. 90% of survey respondents indicated consumer inventory was “Just Right” in March vs. approximately 25% the past several months. Demand at retail has remained solid growing in the mid-single digits the past several months. Therefore, we think consumer shipments will soon turn positive in the U.S. market following an 8% decline in the first quarter 2015.

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