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Bright Spots: SRNA Shares Signs of Tire Industry Recovery

Sumitomo Rubber North America (SRNA) hosted its second COVID-19 dealer forum April 30 to update its dealers on the current economic state of the tire industry and its business.

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As many U.S. states and Canadian provinces plan to reopen nonessential businesses in the coming weeks, the tire industry and tire dealer businesses are set to see an uptick in business – a small sign on the road to economic recovery from the pandemic, Sumitomo executives said.

Rick Brennan, SRNA’s vice president of strategic planning, said replacement tire industry volumes were down 64% in April for passenger tires compared to 19% in March, citing U.S. Tire Manufacturers Association data. Light truck replacement volumes were down 55% in April compared to 12% in March. A bright spot showed in replacement volumes for medium-duty truck tires with this segment seeing only a 1% decrease in April compared to other segments. However, the segment was up 10% in March.

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“TBR maintained at a good rate,” Brennan said.

When projecting overall replacement unit volumes for the year, Brennan said he believes the industry will be down around 16%- 20% this year, but retail pricing should remain stable.

He also pointed to an uptick in miles driven as a bright spot for the tire industry. Citing data from INRIX, Brennan said two weeks ago miles driven was down 48%. The week of April 27, INRIX data showed the decrease in miles driven down 41% compared to numbers before shelter-in-place orders went into effect. He said he anticipates miles driven to rise as states begin to reopen businesses.

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Consumer Tire Business Update

Matt Leeper, SRNA’s director of sales, consumer, said compared to two weeks ago, increases have been seen across the board thanks to government support and the relaxing of shelter-in-place orders. But according to dealer feedback, he said dealers are 50% down in sell in and sell out. Many dealers have had to put a hard stop on orders, furloughed employees and pulled back on marketing efforts, he said. However, the situation is gradually turning around.

For SRNA, Leeper said the company had a “close to normal” week last week in new order volume as daily orders increased, despite sellout being 20% down for dealers, according to feedback the company received. He said dealers who are diversified have been less impacted. Areas such as the southeast, northwest and west are recovering positively with more order activity, which Leeper attributed to government support.

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According to feedback, he said dealers are going to market with instant rebates and other promotions, and distribution warehouses are rehiring their staff.

“All of this paints a nice picture of a temporary recovery and what we all hope a more permanent recovery,” Leeper said.

While SRNA’s backorders have decreased, Leeper said the company expected a greater decline. However, demand for the Falken Wildpeak A/T3W has remained strong and backorders on the tire have gone down in the last several weeks.

Leeper said SRNA’s Falken Fanatic associate dealer program gained dealers while states were under shelter-in-place orders. During the last six weeks, he said the company’s associate dealer sales team conducted a call campaign and reached out to Fanatic dealers to review their program status and offer support where needed.

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TBR Sales Update

Bob Klimm, director of sales for SRNA’s TBR division in North America, said truck travel has decreased 13% nationally due to a variety of factors from different industries affecting the decline. Some of those include low demand for oil, and in the construction sector, a decline in cement sales; however, Klimm said he’s hopeful the government’s pending infrastructure stimulus package will help reinvigorate freight travel.

Klimm said he’s seen a slowdown in tire sales volume, which varies by dealer and by region. However, most dealers have reported a 15-25% decrease, according to feedback the company has received.

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Despite decreases, SRNA is releasing two new TBR products in the growing 19.5-in. segment, Kilmm said. It plans to start production on its RI151 Plus in July 2020, which promises long tread life without sacrificing towing capabilities and high-scrub applications. The tire is targeted for utility vehicles. Klimm said following the 151 Plus launch, SRNA will start production on the RI191, a new pick-up and delivery tire that targets parcel delivery fleets. Production of the RI191 will start in August 2020.

OE Update

Dave Colletti, SRNA’s vice president of OE and technical services, said for many vehicle manufacturers, restarting manufacturing has presented challenges in ensuring part supply and quality. Manufacturers, such as Ford, GM and VW, have also delayed production start dates and have not yet set a date for when they will resume production. However, many automakers have set dates in May to reopen their factories.

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Colletti said light vehicle sales look to be on a slow recovery after hitting a low point at the end of March, citing to J.D. Power data. In 2020, light vehicle sales are projected to be lower than 2019, he said citing IHS Markit data. However, a slow recovery will see light vehicle sales reach 16 million vehicles per year by 2022 at the earliest. Colletti said the current slump in vehicle sales is a far cry from the downturn experienced during the Great Recession.

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