SEMA News—February 2013
By Steve Campbell
Wheel and Tire Trends Update
A Look at the Marketplace With Industry Pros and Media
While the economy continues to influence the tire and wheel markets, the greatest impacts on the industry have resulted from the elimination of the tariffs on Chinese tires, the steady growth of lower rolling resistance tires, advances in technology and the proliferation of Internet research, according to knowledgeable wheel-and-tire pros and media. They shared their views for this latest look at trends in their segments of the specialty-equipment marketplace.
The hottest tire categories in the United States are entry-level, Chinese-made passenger and light-truck products, according to David E. Zielasko, who is the editor and publisher of Tire Business newspaper. The tariff on those imports ended in September, he said, and there has been a renewed influx, including tires, from some of the more than 50 Chinese manufacturers exhibiting at the most recent SEMA Show.
“Tire retailers are looking for entry-level products now that many of the domestic tire makers have stopped producing them,” Zielasko said. “That’s opening the door, and we have seen several Chinese tire makers looking to establish footholds in the United States with their own branded products.”
Hank Feldman, president of Performance Plus Tire and Auto Superstore, said that the end of the tariff is also placing increasing pressure on domestic manufacturers to adjust prices that had skyrocketed over the last three years. Overcapacity and surplus inventories have also contributed to the drop in prices.
“We are seeing growth with grassroots and niche marketing,” Feldman said. “Cheap tires from China are hitting our shores once again just as the crisis in Europe impacts their other important market. It will become a buyer’s market in the near term.”
Jim Smith, editor of Tire Review magazine, said that the prices of mid-line tires were decreasing anywhere from 6% to 12% around the time of the SEMA Show, and industry insiders are expecting to see those price drops to continue through 2013.
“While that is not all because of the end of the tariff, it had a domino effect in terms of pricing,” Smith said, “and the lack of business also played a large role. The propensity of the market right now is either entry-level, low-cost tires or the touring area, which is kind of a step up from there. Touring covers a broad range of minivans and upper-end sedans with primarily H and T speed-rated tires.”
Smith said that he’s seen a dramatic reduction in tuner applications. While sport compacts remain popular in some geographical locations around the country, as does the musclecar category, the tuner segment no longer exists as a broad market.
Meanwhile, ecologically themed tires are still selling, with reduced noise and reduced rolling resistance products driving tread designs in that realm, according to Feldman. But there is some question about how long that development will last simply because it is becoming less of a trend and more of an expected facet of tire construction.
“We’re starting to see a little softening of that whole concept among consumers,” Smith said. “It has become ingrained in the tire industry, so it is almost expected. But there are also economic pressures. People are questioning why they should pay more for a fuel-efficient tire, so you’re seeing some of the gloss come off that trend.”
Smith said that consumers are also questioning how efficient such tires really are, since there is no rating system that they can rely on. Manufacturers are thus free to say that their tires deliver 20% better fuel economy without saying 20% better than what.
Still there’s no denying that tires and wheels are being designed and constructed to be lighter to help offset stringent fuel standards, and tire compounds are being formulated for greater durability and wear.
“A lot of our readers are switching to commercial tires mounted on 19.5-in. wheels,” said Bob Carpenter, editor of 8-Lug HD Truck and Work Truck Review magazines. “It’s an expensive upgrade, but you can get close to 100,000 miles or even more on them once you’ve made the switch. A guy who hauls a heavy load all week usually gets only 20,000–30,000 miles out of a set of tires. If you use your truck to make money, you don’t want it sitting at the tire shop for half a day every few months.”
Rick Péwé, editor-in-chief of 4-Wheel & Off-Road magazine, pointed out that there is also an increasing demand for tires applicable to towing.
“Tow vehicles require a higher load rating, such as D and E,” he said. “Five years ago, there were not nearly as many tow offerings with good tread patterns in all-terrain, mild-terrain and even aggressive tires. Now we have tires that are made for trucks that tow, but the owners still want a lift kit and an aggressive stance. That can’t really be done on C-load-rated tires.”
As consumers make their choices, the search for lower prices and better wear characteristics is of paramount concern to tire manufacturers. Ken Warner, vice president of sales and marketing for Mickey Thompson Performance Tires & Wheels, pointed out that tire design includes a heavy focus on tread engineering, including tread blocks, circumferential and lateral groove design and depth, lug design and shoulder design.
“It’s important that attention be given to every aspect of the tire tread and shoulder design, depending upon the applications for the tire,” Warner said. “And, for better or worse, manufacturing tires still requires oil. Trends in materials and construction include efforts to conserve oil and use of alternative oils in the manufacturing process, along with a variety of ways to safely recycle used tires at the end of their life span.”
There is also a trend away from absurdly large tires sizes, Feldman said, with the aftermarket seeing increased sales of tires built for 16-, 17- and 18-in. wheel sizes. The exception to that trend remains in the niche markets, and he said that the truck-tire market is seeing a resurgence. Péwé concurred, noting that manufacturers are coming out with 38-, 40- and 42-in. tires with alternatives in tread patterns.
“Nitto just introduced a large tire that is available in both a soft compound for trail use and a different compound that is DOT-approved for the street,” he said. “People don’t stick with the stock 33-in. size when they replace their tires. They start moving up, and even the 35 is pretty small for a trail rig anymore.”
“Truck owners are trying to balance performance and aesthetics,” Burnside said. “They want a tire that will perform in multiple arenas, will withstand the tortures of heavy loads and towing and will provide longevity. The era of large, lifted, flashy trucks is gone.”
There has also been a shift in vehicle construction. Zielasko pointed out that crossover vehicles continue to gain ground over sport utilities. CUVs are built, for the most part, using passenger-car platforms while SUVs tend to be truck-based, and there are resultant differences in tire requirements.
“CUVs require tires that are quieter, are optimized for rolling resistance and need less off-road capability,” he said. “And we are also seeing trends toward tires with higher speed ratings—H and V—on more vehicles.”
Péwé noted that, regardless of market or vehicle type, tire dealers must acknowledge that retailing is changing under the influence of the Internet.
“People in the middle of Iowa can now get a set of tires and wheels sent to them mounted and balanced from any of the larger mail-order companies,” he said. “National Tire & Wheel has been doing that for some time, and package deals seem to be where it’s at.”
Warner said that Mickey Thompson encourages its dealers to create packages, with the focus on value rather than on trying to be the least expensive.
“Retailers should package the sale with options such as tires and wheels, tires and alignment service, tires with a free tire rotation service every 5,000 miles,” he said. “Be creative in packaging the sale to add more value and bring the customer back. Most manufacturers are developing programs that benefit tire dealers, and that’s good business. Things such as consumer rebate programs, incentives and referral reward programs for dealers create more opportunities for growth and sales.”
Dealers also need to maintain their integrity, even in the face of economic uncertainty and those wavering prices.
“Even when the economy is down and people are scraping by, retailers still have a duty to the customer and to themselves,” said Smith. “They have a responsibility to deliver the customer the best tires possible for the application and the situation. If the customer comes in with a performance vehicle with V-rated tires on it, the retailer is obliged to replace those with V-rated tires. Not an H, not an S. If the customer insists on something cheaper, the dealer needs to walk away from that business. It is just a lawsuit waiting to happen.”
Dealers should also be ready to address and service tire-pressure monitoring systems (TPMS), many of which have come due for maintenance. Checking the TPMS prior to performing tire work will help dealers avoid disputes with customers should issues arise after the work has been completed.
“The first TPMS sensors began appearing on vehicles in significant numbers five or six years ago,” Zielasko said, “and their battery life is now coming to an end. Tire dealers need to know how to service the systems, and they should check the batteries and the functionality of the systems themselves before beginning any tire work.”
“Our industry will have to continue to stay on top of technology,” said Joseph Schaefer, president of Konig American and chair-elect of SEMA’s Wheel & Tire Council (WTC). “We must continue on our path with current and emerging production standards and continue being environmentally conscientious. Casting technologies and testing standards continue to get better and better, and the advanced machining capabilities that are continuously being developed are bringing wheels with great design detail to the market. Designers are spending more time on the details of the wheel style as well as making their fitments more exact.”
Anyone who walked the South Hall of the Las Vegas Convention Center during the 2012 SEMA Show also understands that there is an abundance of wheel types and sizes for every vehicle and every preference. And even more variety is available through customization.
“Wheel buyers now have the option to order custom paint, custom offsets and custom finishes,” said Wayne Williams, owner and founder of ExSell Marketing, an automotive aftermarket marketing specialist. “But mass-customization is a business for U.S. manufacturers. It’s nearly impossible to source specialty fitments from China or to load a container full of a style that might not appeal to individual tastes.”
Freelancer Burnside said that manufacturers must do more than offer variety and custom options, however. They must strive to improve quality, eliminate chrome pitting and peeling, switch to physical vapor deposition instead of chrome or improve chrome quality or thickness. Vehicle owners are willing to pay for such quality, he said. That is also Schaefer’s admonition to dealers.
“Retailers must choose companies that they feel secure with and are confident can offer a consistent supply of high-quality products,” he said. “They need to focus on choosing whom they purchase their products from as well as the many variations in fitments, because there are now more different stances desired from various customers. Some of those are not ‘proper’ fitments, so it’s important that the retailer is able to understand them and the pros and cons that come with them. The retailer should be able to qualify customers as to what fitment is appropriate for a particular need and lifestyle.”
Williams said many manufacturers that exhibited at the 2012 SEMA Show introduced minimal new styles, choosing to stick with designs that were selling well and thus streamlining their inventories to the most popular styles. He also pointed out that some of the established niches have developed “sweet spots” that don’t change much. For instance, lifted and leveled trucks maintain 17-, 18- and 20-in. sizes for the most part and tend to matte black or gloss black with machined highlights in both standard and deep offsets.
But the newest trend, Williams said, is Hellaflush—tires placed as close to the fenderwell edge as possible.
“It’s all about extreme stance enhancement—wider, bigger, flashy and flush,” he said. “It’s wheels and tires with smaller diameters and wider widths, extreme and plain colors, even colors from a rattle spray can. It’s the essence of ‘extreme individualism’—the new-car crowd and ‘The Fast and the Furious’ crowd all grown up. It’s focused on, but not exclusive to, Asian and German imports, mostly small coupes and midsize sedans. Though it’s the latest trend, it has an early lowrider feel for those of us old enough to remember—skinny tires stretch-mounted on wider chrome spoke rims.”
Carpenter said that the readers of his heavy-duty truck magazine are looking more and more at forged wheels for their strength. They’re also looking for direct-fit or hub-centric wheels in which the center hole of the wheel is the actual center bore rather than being determined by lug-bolt pattern or utilizing an adapter.
“There is a resurgence in the 18- to 20-in. segment of wheels in the off-road and diesel performance market,” he said. “In fact, according to Toyo market research, there were more than 270 trucks at the 2012 SEMA Show, and the 20-in. size was the most popular among them.”
Burnside said that 20-in. dually wheels are also on the rise, and Péwé noted that 20s are about the maximum he’s seeing in the off-road market.
“For a while, wheels just kept getting bigger and bigger,” he said, “but that’s no longer the push. Instead, they have become more functional and aesthetically pleasing. Those larger sizes will always be available for show vehicles, but they cut down on sidewall height, and the sidewall gives you better off-road performance, allowing you to air down and let the tire flex when you are crawling over obstacles. Even when you’re using higher pressures in competition, you still need that cushionable impact area.”
“On the other hand,” he said, “there are a lot of interesting things going on with bead locks—particularly internal bead locks, such as InnerAirLocks, which are a tube system that mounts inside the tire on the existing rims. They allow the tire to be run at lower pressure for better traction, and they’re DOT approved. We should also mention the Birddog wheel from Interco, which is built specifically for the off-road market. It’s an environmentally friendly wheel that allows the tire to flex more easily across the ground and has an internal bead-retention system.”
Schaefer said that his company is now using the M.A.T. (Most Advanced Technology) process that was developed by Enkei of Japan. It’s a process in which spinning the rim during manufacture allows a type of metal flow that results in properties similar to those obtained from forging. The upshot is a finer and more even aluminum structure that provides increased strength and reduced weight.
In addition to its manufacturing technology, Konig is also up to speed with the latest in marketing trends.
“Konig is all about displaying to the consumer who we are as a company,” Schaefer said. “Retail customers especially are looking for that transparency so they can connect based on their lifestyles and beliefs. Social media has remained a primary focus on Konig’s marketing agenda for this very reason, and we are also increasing our event marketing. Smaller auto shows are gaining popularity, and we’re placing emphasis on them.”
Social media channels, video, search-engine optimization and dealer programs that support the sale are on the Mickey Thompson marketing agenda.
“Today’s younger, more savvy buyers are looking for the best deal, and they know how to do their research online,” Warner said. “We feel that we need to make our brand and our products very easy to find in the places where consumers typically search to meet their requirements.”
But even with all the advances in electronic media, Schaefer said that the retail end of the distribution chain is the ultimate marketing tool.
“Great products and quality dealers who provide the best service to their customers offer the greatest opportunities for tire and wheel manufacturers,” he said.