SEMA News—February 2015
By Steve Campbell
2015 Tire & Wheel Trends
Market Forces and Technology May Change the Shape of the Industry
The wheel and tire market has improved over the past year, according to a widely held consensus among professionals in the automotive specialty-equipment industry. New offerings, technology and an improving economy bode well for sales in 2015, but there are also impediments that may deflate some of the optimism.
CAFE and Tire Tariffs
Part of that development has come from the federal government’s push for higher Corporate Average Fuel Economy (CAFE) standards, Ulrich said, and fellow tire journalist David Zielasko, editor and vice president/publisher of Tire Business, concurred with that assessment.
“The federal government’s drive for higher CAFE standards has led automakers to demand tires that aid in fuel economy,” Zielasko said. “As a result, tire makers have been designing and building tires with less rolling resistance, which improves vehicle gas mileage but can lead to a tradeoff in performance capabilities. Specifically, there have been some customer complaints that these tires exhibit less road grip and wear out more quickly.”
Of even greater consequence from an overall market standpoint, however, is the imposition of duties on Chinese tire imports. Elevated tariffs on imports enacted under Section 421 of the Trade Act ended in September 2012, and Chinese importers made significant gains in the U.S. tire market since then. Zielasko said that the tariffs caused tire makers, importers and private-brand companies to move molds and production to other countries and, many people believe, contributed to higher tire prices that made a particular impact on consumers who sought less-expensive, entry-level tires.
“Since the tariffs came off, imported passenger tires from China to the United States rebounded to a record 46 million units in 2013 from 29.3 million units a year earlier,” Zielasko reported. This increase led the United Steelworkers union in June to again petition Commerce for relief, this time in the form of countervailing and anti-dumping duties, leading the Department to open another investigation into Chinese consumer tire imports.
“As it stands today, Chinese tires exceed 20% of the U.S. consumer tire replacement market, and the International Trade Commission (ITC) determined that the U.S. tire industry has, in fact, been materially injured by the influx of Chinese passenger and light-truck tire imports. As of December 1, 2014, the ITC started assessing countervailing duties for most companies of 15.69% on top of the prevailing 4% rate. The Commerce Department continues to weigh whether to assess anti-dumping duties in addition to the countervailing duties. A final determination is due by April 6, 2015.”
That action is likely to cause disruption to the domestic tire market, Zielasko said. It will open opportunities for some companies while creating a negative impact on others.
Hank Feldman, president of international retail and e-commerce company Performance Plus Tire and Automotive Superstore, said that many of the large-diameter ultra-high-performance tires sold in the United States are made only in China.
“They’re designed to cater to custom-wheel purchasers,” he said. “People want the wheels and need the tires to complete the package. They are after a specific look more than ultimate performance. The large tire tariffs could therefore also have an impact on those segments of the wheel industry.”
“With the Department of Commerce currently studying anti-dumping duties, the total import duties could be high as 50%,” he said. “For retailers in markets that are sensitive to price, the availability of low-cost tires could become limited if Commerce decides to impose the duties on Chinese imported tires.”
Hot Tire Products and Innovations
Hybrid tires—what some are calling “tweeners”—are among the sharpest product trends in the tire industry. Ulrich said that the most significant trend in passenger-car tires is the ultra-high-performance (UHP) touring tire, which combines the ride comfort and all-season capability of a touring tire—including improved snow traction—with the speed rating and handling of a UHP or summer tire.
“Unlike with UHP tires, the tire manufacturers are backing the new offerings with a limited tread-wear warranty and are making them available in many popular sizes,” Ulrich said. “It’s the next generation of broad-market tire—kind of a super tire, really. Every manufacturer is jumping on this technological bandwagon, and many of them showcased these tires at the 2014 SEMA Show.”
Jim Smith, editor of Tire Review magazine, said that tire makers need to also spend time educating their customers about the benefits of such higher-end tires.
“Even in the HP and UHP segments, consumers have been choosing less-known brands and options primarily based on price,” he said. “This indicates that tire companies are not doing a very good job of explaining the true technological and performance values of their products or of modern radial tires as a whole. Tire makers don’t seem to see the reality of today’s consumers and their views of the world. I think they need to stop pretending that nothing has changed following the recession.”
There are also hybrid-type “tweener” offerings in the light-truck segment. They are designed to fit between the all-terrain offerings, which have become more like passenger-car tires, and all-out mud-terrain tires that may have noise drawbacks for those not interested in hard-core performance.
“The off-road ‘tweener’ tires are not nearly as aggressive as a mud terrain, but they are far more aggressive than a standard all-terrain,” said Rick Péwé, content director for the Four Wheeler Network of The Enthusiast Network (TEN) media company. “If you are a dedicated mud bugger, you’re not going to get that type of tire. But for a construction worker or a hunter who doesn’t need such an aggressive, sometimes loud tire typified by mud terrains, it is the perfect way to go. They generally utilize open lugs and usually have sidewall enhancements for traction, and they’re also usually more durable, with increased silica content as well as other long-life, anti-chipping agents.”
Bob Riegel, retail education manager for Bridgestone Americas Tire Operations, said that his company is participating in advances to create “rubber” from non-petroleum-based sources such as the guayule shrub. With natural rubber availability decreasing and prices rising, Bridgestone is looking to create synthetic alternatives.
“Bridgestone’s DriveGuard has also continued premium touring tire evolution while incorporating run-flat functionality for today’s coupes, sedans and wagons,” Riegel said. “This product will continue to develop as vehicle manufacturers stop offering regular spare tires, and they’re designed specifically for vehicles outfitted with tire-pressure monitoring systems. A version for CUVs and SUVs is due soon.”
TIA’s Rohlwing said that tires are also now available that may work even better as they wear. In those designs, the sipes—the thin slits that are cut across the tread surface to improve traction in wet or icy conditions—get wider as the tread wears down.
“Traditional sipes are narrow at the base and widen as they go out to the edge of the tread, so most tires have optimum wet traction when the tread is new because there is more open space to channel the water from the tire,” Rohlwing explained. “Goodyear and Michelin have developed technology where the sipes are widest at the base, so the ability to channel water from under the tread actually improves as the tire wears down. Michelin’s Premier A/S and Goodyear’s Assurance TripleTred All-Season are setting the newest trend for this tread design.”
Marketing and Selling Tires
The tire and wheel marketplace has always been competitive, but a new force has come into play in the replacement-tire business over the last few years: car dealerships.
“According to the latest market info from Tire Review magazine, the car dealer market share grew from 8% in 2012 to 11% in 2013,” Rohlwing said. “The additional sales came from the mass merchants, who watched their market share fall from 13% to 10% over the same time period.”
“If you have a specialty aspect to your business, leverage social media exposure,” he advised. “We’re doing things that get play in social media, and you can’t buy that kind of advertising.”
Feldman also stressed the importance of e-commerce to his operation. It’s where his company’s greatest growth has come in the last few years.
“The Internet will never totally take away the brick-and-mortar business, because you can’t install a tire on the Internet,” he said. “There is always going to be a need for installation centers, and a lot of people would rather buy and have tires installed from the same dealer. But they use the Internet for research and as a tool to negotiate pricing.”
The result of that ability for consumers to gather information quickly and easily means that tire dealers will have to train their employees to be more knowledgeable in explaining differences between tires to their customers, Zielasko said.
“The demand for tire knowledge is also going to become more pronounced when the new federal tire labeling law takes effect,” he pointed out. “Once that happens, consumers will see stickers pasted on each tire telling them about rolling resistance, tread wear and traction. That will allow them to comparison shop more easily.”
Rohlwing suggested that survival itself for retailers rests in embracing technology in every way possible, including a web presence for generations of tire buyers who conduct most of their research online and mobile platforms that make it easy for consumers with smartphones to get the information they want.
“Tire dealers probably face more challenges than opportunities,” he said, “but if tire dealers can expand their maintenance and repair business, they will be able to compete with the growing number of competitors such as new-car dealers. The greatest opportunities will probably be in the area of economy tires, if the countervailing duties on Chinese imports are imposed. If the tire companies can produce economy-line tires that are competitive with higher-priced imports, there will definitely be some opportunities for growth in their prospective market shares.”
“A re-shuffle of the field means that the best prepared at that moment has a chance to win,” said Kelly Austin, national sales manager for the wheel division of Tireco Inc. “The availability and quality of specialty items is better than ever. New treads for mileage and for special conditions such off-road and winter create opportunities.”
Recognizing market shifts may be the most crucial factor in incorporating them quickly and efficiently.
“As much as many want to believe that things have not changed, they truly have,” said Tire Review’s Smith. “One need look no further than the declining number of 15- to 18-year-olds taking driver’s licenses and the age-group balance in new-vehicle sales. These demographic shifts will impact the near- and long-term futures of the segment. The biggest thing is to get closer to your customers and have a better understanding of the underlying drivers in their lives. Instead of trying to hit home runs with every sales opportunity, make sure that customers homer with the right products that entirely fit not just their vehicles but also their values and lives.”
Hottest Wheel Products
Many consumers can’t tell the difference between a performance tire for a passenger car and an all-terrain tire for a light truck. But wheels are a different story. From unique finishes to complex design elements, different wheels can completely change the look of a vehicle.
“Designs have become more detail oriented,” said Joseph Schaefer, president of Konig American. “Companies are really producing some of the nicest and cleanest products ever. It was interesting to see how many companies had produced very clean, detailed wheel designs with aggressive but functional fitments at this year’s SEMA Show.”
Feldman said that his company sells several thousand wheels a month in addition to its core tire products, and that part of the market has also come back from the recession years.
“We are seeing growth in black wheels, and PVD [physical vapor deposition] finishes are replacing chrome,” he said. “In fact, I don’t think you’re going to see very many chrome wheels in a few years. The quality and look of PVD is so close that it is going to eliminate chrome.”
Péwé agreed and said that it’s also getting more difficult to find 15- or even 16-in. wheels, which can be a problem for the audiences of his off-road magazines and websites.
“Almost everything is being made for 17- and 18-in. applications,” he said. “If you only want a 33-in.-tall tire, you don’t want an 18-in. rim because of the tread-to-sidewall ratio. You need a substantial sidewall in a good off-road tire, so those smaller-diameter wheels could be a piece of the market that some smart entrepreneur might want to fill.”
“Most consumers don’t understand why a 20x12-in. wheel with a 3-in. lip will not fit on a stock-height truck,” he said. “It’s the job of the installer to inform the consumer of potential problems before they attempt to sell an oversized tire and wheel package. Without modifications, such as a lift kit, the tire may rub on a fender or suspension components.”
From Péwé’s off-roader perspective, weight ratings are also of prime concern. He pointed out that a wheel rated at 2,500 lbs. doesn’t have much use in a market dedicated to far heavier loads.
“If you have a ¾-ton pickup, you’re not going to be running around on wheels that are capable of carrying only a couple thousand pounds. You need a real truck wheel, and some of the manufacturers are realizing that.”
Horlick also noted the prevalence of concave staggered fitment wheels on passenger vehicles at the 2014 SEMA Show. Such wheels are intended to fit flush with the fender or even extend past it, he said, but that that type of “aggressive” design may cause other fitment issues.
Wayne Williams, president of ExSell Marketing, also made note of the trend toward tight fitments and said that they must be properly engineered to sit inside the vehicle fenderwells.
“Using the vehicle fenderwells as a frame, consumers and wheel manufacturers are engineering specific fitments considering specific tires and specific wheels to create a specific look—a ‘master piece,’ if you will,” he said. “The wheel vendor and vehicle owners post the images to social media to draw attention to their capabilities. The manufacturer’s desire is to draw inquires from potential customers who might want to duplicate the look but perhaps with different custom finishes.”
Finishes, Williams said, are the truly hot trend in wheels, and he’s not talking about simple color changes.
“Different treatments to aluminum before applying the finish coats are the hottest trend,” he said. “Brushed finishes are popular, and they’re enhanced with special paints and coatings that are transparent and create unique appearances. It’s all part of the ‘one-off’ trend—using popular designs and constructions but creating specific treatments to the wheels themselves and applying vivid colors using unique coatings.”
Schaefer said that flow-forming technology continues to be another growing trend in the wheel industry. The process uses a combination of heat, pressure and spinning to fabricate a high-strength wheel at less cost than for a forged wheel.
“More companies are turning to flow-forming technology to produce lighter, stronger and more efficient products,”
Austin also said that the traditional wheel-distribution channels are changing, with many smaller importers skipping the regional distributor route and going directly to retailers.
“That is changing pricing levels and adding delays for freight,” he said. “In order to succeed, retailers have to be prepared and know what their suppliers will and won’t do to help them.”
Marketing and Selling Wheels
In any retail operation, customer service is king. It quickly and distinctly differentiates a well-run business from one that won’t be around long. It is almost undoubtedly the chief marketing tool for sales and customer retention.
As the chair of SEMA’s Wheel & Tire Council, Schaefer pointed to his organization’s “Ride Guide” publication as a major complement to customer service.
“The ‘Ride Guide’ will provide retailers and manufacturers alike with the ability to give customers a tangible idea of how a modification or change in wheel and tire package will effect everything from performance to ride quality,” he said. “This was never available before, and it should ensure that every customer knows what will happen as a result of their purchase.”
Williams also pointed to the use of social media in wheel marketing, especially to showcase modern exotic finishes.
“Vehicle photography has always been a mainstay in the aftermarket, but many wheel companies are taking more care in location selection and vehicle selection as well as more and higher-end video presentations,” he said.
“These well-thought-out image presentations are then posted to social media such as Facebook, Instagram and other social sites. That is intelligent and purposeful marketing.”
Most of the experts we consulted said that technology presents the greatest challenge to the wheel market. Increasing vehicle complexity, including electronically controlled braking and handling systems, present hurdles for engineers of all ancillary products.
“Vehicle systems are becoming so advanced that it will be our job as an industry to put the time in and really understand how every microscopic change can effect a vehicle as well as the customer’s overall safety,” Schaefer said. “That is exactly what SEMA and the SEMA Wheel & Tire Council are working so hard to do for members.”