Most truck tire market analysts believe that 2011 will be a much-improved year for medium truck tires. RMA is calling for an 11% increase in replacement truck tire shipments this year vs. last, and the OE side will be up 47%.
But going forward, what do tiremakers see on the horizon and how will this affect tire retailers?
The good news is that every manufacturer contacted by Tire Review believes that the surge will continue through 2012. But there are mixed feelings about market performance for 2013 and beyond.
We interviewed seven key suppliers in the medium truck tire market for this article, and asked each for their thoughts on the future of the market, as well as several other important issues. Their views below offer a road map (make that a GPS) for medium truck tire dealers that supply tires for Classes 7-8 fleets.
Immediate and Long-Term Future
Chris Ripani, director of marketing and strategic brands, Bridgestone Americas – “The medium truck tire business continues to grow. After this sharp recovery year we anticipate longer term, more stabilized growth. While the tire business grows, so do raw materials. Historically, Bridgestone has attempted to hold the line on price increases. However, we believe raw material prices will continue to trend up.”
Cliff Armstrong, director of marketing for commercial vehicle tires, Continental Tire the Americas – “We see near-term being strong for truck tire shipments with growth throughout 2011. Beyond 2011, we see growth moderating somewhat with an increase in shipments in 2012 vs. 2011. There are a few unknowns that will affect freight movement and, therefore, truck tire sales, starting with the overall U.S. economy and the current budget impasse. The cost of materials such as natural rubber has increased dramatically in the last 18 months.”
Bill Hoban, national truck tires sales manager, Cooper Tire & Rubber Co. – “Thus far, 2011 has been a very successful year for Cooper and we forecast continued strength based on several factors. First, OE truck sales are strong. Second, shipping tonnage is forecasted to remain robust for 2011. In addition, the shortage of good quality casings is forcing trucking companies to purchase new tires.”
Bruce Woodruff, director of marketing for commercial tire systems, Goodyear Tire & Rubber Co. – “The prospects for the short term are very positive. OE has been very strong as many trucking companies sold or scrapped excess capacity during the recession. As the economy has started to recover, orders for new trucks and trailers have been very strong, particularly in the new trailer market. The year-to-date, year-over-year growth for the OE truck tire market is 58%. The replacement market has been strong in 2011, as well, with year-to-date, year-over-year growth of 17%. For 2012 and beyond, we expect the OE truck tire market to relax and the replacement market to grow at levels comparable to the GDP. The growth of retreaded tire sales is a sign that recovery is under way. However, one area of concern for retreaders is the availability of casings.”
Ted Becker, vice president of truck tire marketing, Michelin North America – “Industry data indicates that the market saw an upturn in medium truck tire demand during 2010 and it appears this will continue through the end of the year.”
John Hagan, senior director of sales, Toyo Tire U.S.A. – “The U.S. market in total will see an improvement this year over 2010, but OE is responsible for most of the gains as the replacement cycle for equipment continues to catch up for purchases that were deferred in 2009 and 2010. Near term, this trend should continue. Longer term, the industry has a long way to go to return to the recent peak in 2006.”
Rick Phillips, director of commercial sales, Yokohama Tire Corp. – “The commercial tire market is definitely alive and well. In the short term, total industry supply vs. total industry demand is still very much out of balance. This started last year with the economic recovery, as freight started to move and OEM orders increased and have intensified through the first half of 2011. This supply deficit could continue well into 2012. Over the long term, it will level off but where exactly the ‘new normal’ will be is yet to be determined.”
Shipments and Opportunities
Bridgestone’s Ripani – “Like the majority of manufacturers, Bridgestone is seeing increases in demand that in some sizes are outstripping manufacturing capacity. We are seeing many of our customers trending to better tire care and retreading, both of which extend casing life.”
Continental’s Armstrong – “Shipments will stay strong for the near term, which is the next 18 to 24 months. From there, we will see moderate growth. The opportunities involve finding creative ways to help the fleet owners lower their overall driving costs. We’re doing this by offering a comprehensive list of SmartWay verified, fuel-efficient tires for the over-the-road goods segment and giving the construction segment user robust products that withstand demanding use.”
Cooper’s Hoban – “We’re very bullish on the commercial market. Fleets are looking for brands that offer the best value. We’re well-positioned to fill their needs.”
Goodyear’s Woodruff – “For the remainder of the year and into the first part of 2012, OE shipments will continue to grow at a faster rate than the replacement market. Opportunities for tire manufacturers to become full-service suppliers that offer solutions to fleet needs will continue to present themselves. In addition, the Tax Relief Act of 2010 allows for accelerated depreciation of commercial equipment during 2011. This has caused some pre-buys for equipment in 2011 in order to take advantage of accelerated depreciation.”
Michelin’s Becker – “With the recent increase in fuel costs, the truck tire market as a whole continues to turn toward fuel-efficient tires, and the medium tire segment is no different. The rising cost of doing business has thrown a spotlight on tires – a significant cost for trucking fleets. Fleet managers are scrutinizing tires as to their effect on the bottom line. This increased scrutiny and analysis leads to more and more companies turning to tires that will save money on fuel and offer the best total cost of ownership.”
Toyo’s Hagan – “The U.S. market seems to have stabilized and there seems to be a good balance of supply and demand, if anything a slight shortage. For companies producing tires in the U.S., this is an attractive situation. Unfortunately, the rapid increase in raw material costs is limiting the upside. The overall upward trend in shipments could persist for several years based on the severity of the most recent recession and the slow recovery we have experienced so far.”
Yokohama’s Phillips – “Freight capacity is very tight right now. That has allowed the trucking companies who survived the recession to raise their rates. Pent-up demand for tires has been satisfied to a large degree. However, there is still a lot of equipment out there in need of tires. We see OEM demand continuing to be strong as North America has the oldest fleet on record due to many trucking companies delaying their purchasing cycles during the course of the recession. Compared to the same period last year, new truck orders are already up 30% to 40% and they are expected to increase as much as 50% in the second half of this year. This demand will put an ever-further strain on tight supplies. Another factor contributing to the improvement in the trucking industry is the strength – or more precisely the relative lack of it – of the U.S. dollar. The weakened U.S. dollar has actually had a positive effect on manufacturing. This is very good for the trucking industry because when something is manufactured in the U.S., from a state of raw materials to a finished and sold product, the goods are moved an average of eight times by truck vs. two to three times when the same goods are imported.”
Changes in Fleet Buying Criteria
Bridgestone’s Ripani – “Fleets continue to look for suppliers that can lower their overall operating cost. Every fleet has its own set of KPIs (cost/mile, cost/driver hour, etc.) and improved strategic planning will be critical as market conditions continue to impact the bottom line. Fleet buyers are focusing on ways to stretch their assets by looking at lower rolling resistance tires, SmartWay verification and retread specifications.”
Continental’s Armstrong – “Fuel efficiency is rapidly becoming the most important criteria in selecting truck tires. We have invited the end users to test our fuel saving capabilities themselves with their own trucks and at our Uvalde (Texas) Proving Grounds. In essence, fleets can save much more by using fuel efficient technologies – low rolling resistance tires being one – than by using technologies that provide more original wear out miles. We will continue to push this point.”
Cooper’s Hoban – “Many fleets are looking for opportunities to lower their operating costs. They are beginning to realize other brands offer excellent qualities that don’t have the reputation of Tier 1 brands. We have seen many fleets begin to purchase our medium truck tires. Several years ago they were loyal to only Tier 1 brands.”
Goodyear’s Woodruff – “Casing durability and retreadability have become more important. Many fleets that perhaps did not retread at all previously, or limited retreads to specific axles, are extending casing specs and even repair parameters to incorporate additional retreads. Progressive fleets also are looking for ways to reduce costs beyond tires. They are looking for service solutions.”
Michelin’s Becker – “Fleets are moving toward fuel-efficient tires. As the price of fuel remains a major, if not the greatest, expense for fleets, it just makes good business sense to make the switch and reap the benefits of fuel-saving tires. At the very least, fleets need to consider running comparative tests of fuel-efficient tires against their current spec’ing. Dealers can play a vital role in encouraging those tests.”
Toyo’s Hagan – “Fleets today are not willing to take a chance on unproven or unknown brands and are sticking to name brands that they know. They are open to where the tires are manufactured as long as they have the brand of the known manufacturer. They tend to be asking for bids when purchasing larger numbers of tires. They seem willing to shop for the best deal. Value buying has taken the place of loyalty.”
Yokohama’s Phillips – “Most of the fleets that survived the great recession actually changed their buying criteria a long time ago. They are doing more testing and looking at data and analysis. With the use of technology, they have become much more sophisticated and many can now see firsthand how their tire expenditures actually affect the bottom line.”
Fleet Expectations from a Tire Dealer
Ripani – “Fleets are looking for consistent and full service, rapid response times in emergency situations, qualified and well-trained personnel and access to asset management assistance like tire inventory, tracking and management services.”
Armstrong – “Fleets are looking for a true partner that will develop programs to lower their overall driving cost – not just sell them tire units. The key business of a fleet is hauling freight, not managing a tire program. Servicing tire dealers can step in and help the fleet manage its complete tire program – new tires, retreads if used, service, maintenance programs and fleet checks.”
Hoban – “Service, competitive pricing and integrity.”
Woodruff – “Fleets want tire dealers who think like they do and who understand their unique needs and wants. They want to do business with dealers who can help reduce their costs and preserve valuable uptime. Fleets also expect dealers to manage all aspects of their tire programs, from air pressure maintenance and retreading to tire performance measurement and tracking, which Goodyear offers.”
Becker – “Aside from a quality product, fleets are looking for reliable, high-quality, nationwide service that maximizes their uptime. Whether they are operating in one geographic area or across the country, they want to make sure that if they need work done, they can trust it will be done right every time.”
Hagan – “Fleets, as a rule, do not want to have large amounts of inventory. They want and expect dealers to handle this for them, even if it means purchasing ahead and having the dealer store them until needed. They are looking for better-qualified salesmen to handle the issues. The buyers are more accountants and have removed themselves from the actual buy. The fleets also like to see some hands-on concern for their fleet by their tire salesmen using tools like failure analysis, air pressure checks and mileage checks.”
Phillips – “We’re very fortunate to be represented by some of the finest full-service commercial dealers in the industry. They all carry quality products and offer outstanding service, but the ones that really distinguish themselves from the rest of the pack are the ones that make an effort to really understand the fleets’ business, as well as their needs.”
What Do Fleets Need?
Ripani – “Fleets are looking for true partnerships with someone who understands their business, serves their markets and works in creating solutions for their fleets.”
Armstrong – “Fleets need a strong servicing tire dealer that has the backing of a strong tire manufacturer to create this total tire program. The goal of all three parties in this equation – the fleet, the servicing tire dealer and the tire manufacturer – should be the same: lower the fleet’s overall driving cost.”
Hoban – “They need a commercial dealer and tire brand they know will improve their operating profit.”
Woodruff – “Fleets need to identify the top factors that significantly impact their operating costs. They also need accurate data so they can make short- and long-term decisions based on facts. To sum it up, fleets are looking for knowledge. They want expertise. They are looking for someone who understands their business and can help them reduce costs. And they need the right tires for the right applications, when and where they need them. In addition, service is absolutely critical. Fleets want to team up with dealers who can provide service when and where they need it, according to fleets’ specifications.”
Becker – “Over the years, our fleet customers have indicated the importance of maximizing their tire investment through a total cost of ownership approach, as well as the importance of spec’ing tires that do not compromise performance characteristics. In addition, they expressed the need for maintaining and servicing their tires from cradle to grave.”
Hagan – “More education about how to improve their tire costs, and how features in new tire construction will help them reduce costs, such as fuel savings vs. mileage life. SmartWay products are changing the industry and the benefits will need to be shown in real cost savings.”
Phillips – “Fleets need smart solutions that address their specific needs. There are a lot of options available so it is important to select the right products that most adequately meet those needs. For instance, the price of fuel is certainly a factor now and tires with low rolling resistance are in high demand. However, fuel efficiency can come with trade-offs, so it is crucial that fleets consider everything when making tire buying decisions and how those decisions will affect the total bottom line.”
New Technologies
Ripani – “There are a number of new technologies in the industry. The best mix of solutions is a combination of technologies and services. Running on great tires is only one part of a total solution. Fleets should consider any new technology with an eye on fit with their particular tire programs.”
Armstrong – “We will continue to develop next-generation, fuel-efficient products. And you will also see more application-specific products in the market. The transportation business has changed in the past three years. Fleets must be able to react to changing market conditions and customer needs. Most fleets do not have just one type of route with one type of customer anymore. This requires their equipment to do more in various ways.”
Hoban – “SmartWay-verified products are gaining in popularity. With fuel in the $4 range, long distance fleets should consider this option.”
Woodruff – “Fleets will continue to look at technologies that help them reduce their costs. In situations where downtime from tread punctures causes increased tire and service costs, as well as the risk of shipper penalties, tires with self-sealing technology can help. Fuel-efficient tires can reduce the fuel bills of long haul and regional haul fleets. The super wide tires can provide value to bulk haul fleets for which weight savings can be a significant benefit. So there are a lot of different technologies available, including tires that deliver longer mileage and improved fuel efficiency, so one tire can help reduce two fleet expenses. And beyond tires, there are new tools that can help fleets better manage their tire programs.”
Becker – “We’re always looking to bring to market new technologies that provide new benefits to fleets in areas such as fuel efficiency and wear life, without compromising other performance characteristics.”
Hagan – “Tire manufacturers have more products offered today than at any time in history in terms of patterns, size, compounds and tread depths. Job-specific types of tires will continue to be developed and offered for many years to come. Fuel-efficient tires, along with aerodynamic vehicles and improved engines, will be a constant thought in every fleet that wants to remain competitive and show a profit. New laws will continue to push for improvements and fleets will need to evaluate what new technology works best for their application. This country depends on trucks to move the freight that is essential to support growth and prosperity and that will not be changing anytime soon.”
Phillips – “We want to push the technology envelope to try and develop tires that will carry more weight, use less fuel and still provide multiple retread opportunities. Our concept is actually a combination of technologies that focus on four major elements of commercial tires: casing design, rubber compound, tread design and manufacturing process. The way these technologies are combined influences the performance characteristics of the tire and allows for application-specific tires that provide maximum performance for the fleet, which in turn results in a lower cost of operation.”
