Market Dynamics Affecting Recent Tire Price Increases

Market Dynamics Affecting Recent Tire Price Increases

At least eight tiremakers have increased their prices in the last two months, due to a variety of market factors in an eventful year for the tire industry.

At least eight tiremakers have increased their prices in the last two months, due to a variety of factors in an eventful year for the tire industry.

At the start of this month, Kumho Tire USA, Bridgestone Americas, Cooper Tire & Rubber Co. and Firestone Ag increased prices, with the highest increase at up to 6% across Kumho’s products. The month prior, Goodyear Tire & Rubber Co. increased prices on select consumer tire lines by up to 3%. Singapore-based manufacturer Giti Tire USA announced up to a 5% price increase on passenger and light truck tires and up to a 10% hike on all TBR tires starting Nov. 1. As tiremakers struggle to keep healthy operating margins, many manufacturers cite the rising cost of raw materials, transportation and labor as the reason for raising prices this year.

“It’s hurting us and everyone about the same way,” says Richard Smallwood, CEO and president of Sumitomo Rubber North America Inc., about the increase of raw materials. Sumitomo, which manufactures Falken Tires, increased its prices 3-7% on certain Falken products in April.

Anthony Deem, Tire Review contributor and vice president and senior equity research analyst for automotive at Longbow Research, said since last December, the market has seen price inflation on some raw materials used to make tires including oil and steel. Since December 2017, oil prices have jumped 21%, and steel prices have risen 33% due to inflation. Deem said there has also been a 12% decline in natural rubber spot pricing.

“The inflation we’ve seen in 2018, it’s very significant,” Deem says. “But what people don’t realize is that tiremakers are trying to increase prices because they still have a long way to go from fully recovering from raw material inflation seen pretty much after the 2016 election…. In my opinion, the tiremakers haven’t done enough.”

Deem said if the raw materials costs can remain stable with 3% inflation, based on Cooper Tire’s raw material index, there’s potential for many manufacturers to recover at least half their losses from 2017-2018 inflation. Therefore, a scenario for another price increase in the first quarter of 2019 isn’t far fetched.

Higher transportation costs are another factor with ocean freight rates reaching a two-year peak, according to magazine Supply Chain Drive. Smallwood says the truck driver shortage has also impacted shipping.

“It’s costing us more to ship tires than it did a year ago,” he says. “The trucking industry is nearing full capacity, and they don’t have to keep prices low because supply is lower than demand. The tonnage is up, and trucking companies are charging more. The increase they have now is labor.”

Smallwood and Deem agree competition among tiremakers has stalled increases from coming sooner.

“If you raise your prices, you might be afraid that your competitors won’t,” Smallwood said. “The increases are smaller than what you’d normally see, but that’s caused by the fear of losing share in the market…. It still comes down to your operating profit. If it isn’t very good, at some point, you’re going to have to make a decision.”

You May Also Like

Pirelli Revs Up for 2023 Motorsport Season in the US

The Italian tiremaker is set to participate in 10 North American motorsport championships.


Pirelli is reinforcing its commitment to North American racing in 2023 with large-scale involvement and tire distribution to both global and domestic competitions taking place across the continent. The Italian tiremaker is set to participate in 10 North American motorsport championships, with almost 40 Pirelli and partner personnel committed to over 100 races, supplying more than 30,000 tires throughout the course of the season, the company said.

Eight Great Practices for Creating a Winning Team Culture

In your quest to be the absolute best tire/auto service business you can possibly be, you can have a beautiful facility, state-of-the-art equipment and all the amenities to enrich your customer’s experience, but if don’t have a great, “Winning Team” culture, then you still don’t have a truly great company. Related Articles – What Your

What Your Credit Score Can do to Your Business

If you want to explain your business in the future, one thing you need to prioritize is your credit score. Having bad business credit can negatively impact your shop in many ways – from causing difficulties securing financing to getting approved for a lease. Related Articles – Rising Gas Prices Make Tire Distributors Rethink Pricing,

Credit Score Business
Ferrante: What I’ve Learned From Listening to 100,000 Sales Calls

Back in 2014, I authored an article titled, “Are Your Tire/Auto Service Salespeople ‘Winging It’ on the Phone?” At the time the article was published, my Pinnacle Performance Training team and I had evaluated approximately 25,000 sales calls between tire/auto service sales staff and prospective customers. In May of this year, we reached a milestone

What Do Your Signs Say About Your Shop?

Signs are everywhere. Some communicate their message effectively, while others fall flat – and some are just downright confusing. Related Articles – Creating a Positive Work Environment – Using Data to Enrich the Customer Experience – Microlearning Makes the Tire Industry Smarter, More Profitable The Five Man Electrical Band sang in 1971: “Sign, sign, everywhere


Other Posts

Fortune Tires Debuts new US Dealer Website

Current Fortune dealers can access a range of dealer resources, including product information and marketing materials.

Monro Q3 Results: Strength in Tire Sales, Midwest Growth Through Acquisitions

Monro also reported customers trading down to lower priced tires and deferring vehicle maintenance.

financial results
Point S Reveals Ambitious ‘500, 50, 5’ Growth Goal

The independent tire dealer network plans to have 500 stores in 50 states within five years.

Pirelli Equips BMW i4 M50 with EV Tires

Pirelli has developed P Zero tires with Elect technology for BMW’s first fully electric car.