Rolling Toward the Future

SEMA News—February 2019

BUSINESS

By Mike Imlay

Rolling Toward the Future

An Insider’s Look at the Latest Wheel and Tire Trends

  Rolling Toward The FutureAfter its recessionary slowdown, the wheel and tire market is rolling again with an increasing diversity of products. But smart aftermarket businesses will want to plan now to deal with the new advanced driver-assistance systems and increasing market pressures that lay ahead in 2019 and beyond.
   

As two of the most fundamental means to enhance a vehicle’s style and performance, aftermarket wheel and tire upgrades have always been an easy sell. They’re often the very first specialty items consumers add to their new vehicles and are nearly as popular for freshening older vehicles that are beginning to look and feel, well, mundane. While the wheel and tire market noticeably slowed during the recent economic downturn, the good news for 2019 is that it’s rolling forward again.

According to the 2018 SEMA Market Report, the performance and special-purpose tires segment is now a $2.35 billion market, having dipped and then incrementally climbed again from its high of $2.51 billion in 2014. In fact, a full 60% of tire manufacturers surveyed by SEMA’s market research department reported growth
in 2017.

While 65% of products in that category were bought and installed in stores, a sizable customer base (22%) preferred DIY installations. Amid those trends, physical tire shops (35%) and dealerships (11%) have remained the principle sales channels. (See chart: Performance and Special Purpose Tires on p. 34.) The off-road/plus-tire market also continues strong at $1.69 billion, having steadily climbed in similar fashion from its $1.44 billion valuation in 2014 to reflect truck and SUV resurgence. (See chart: Off-Road/Plus-Size Tires on p. 34.)

Naturally following suit, the wheel market, too, has grown from its $1.02 billion level in 2014 to a new high of $1.26 billion in 2017. Again, that upswing has been principally driven by wheel sales for pickup applications (34%), although mid-range vehicles and sports-car sales also account for 17% and 11% of sales respectively. (See chart: Custom Wheels on p. 34.)

Tire Trends

Throughout the global tire market, the light-truck category remains the current focal point, said Modern Tire Dealer Editor Bob Ulrich, who noted that the segment now encompasses three tire types: highway terrain, or H/T, for on-road driving; all-terrain, or A/T, for on- and off-road driving; and mud-terrain, or M/T, for off-road driving.

“For a long time, light-truck owners have been trending toward A/T tires so that they can go off-road whenever they want, which is not very often,” Ulrich observed. “However, some of those same owners and adventurous new light-truck owners have shown an increased interest in driving off-road more often in the last few years. That has led to an increase in the number of M/T tires available in the aftermarket. And for those drivers who don’t want to give up ride and comfort on-road with an M/T tire, but still want to go off-road more often, a new category has emerged in the last year between the A/T and the M/T: the rugged-terrain or R/T tire. Some tire manufacturers refer to their R/T tire as an X/T, for extra-terrain.”

“You can’t miss the degradation of passenger sizes and the increase of light-truck sizes in the market,” agreed Todd Steen, executive director for development at Jackson Motorsports Group and a select-committee member of SEMA’s Wheel & Tire Council (WTC). “Those tires are no longer just taller and wider, but they’re also taller with shorter sidewalls and even higher speed ratings. There’s also more variety in the light-truck market. It was not too long ago that we had only a highway tire, an all-terrain and a mud-terrain to choose from. We seemingly blinked and now have UHP tires, winter tires and even all-weather tires in light-truck fitments.”

Rolling Toward The FutureTire manufacturers are expanding their lines with a wider variety of products to address the latest trends. But as vehicles become more and more automated, expect tire technology to become increasingly complex.  
   

As an increasing number of light-truck owners venture into the great outdoors, Craig Perronne, editor of Off Road Adventures magazine, sees another new tire category emerging.

“More and more name-brand tire companies are getting involved in powersports,” he said. “BFGoodrich has a tire out, and Nitto is coming out with one. There are others who are also rumored to be coming out with them. They keep developing UTV tires that are getting better and better, and we see the tire sizes creeping up in that market, too. It has gone from 30s to 32s, and now some guys are even running 35s. But the emphasis on a UTV is to keep the tire lightweight, especially if you’re racing desert or running dunes.”

And while consumers find themselves confronted by an ever-expanding array of products, look for the treads they’re buying to get more complex as well.

“There is a tremendous amount of work taking place to enhance tire technology, not just through compounding but also through wireless technologies capturing data and microchips being added to help users get the most from their eventual autonomous vehicle ownership,” Steen explained. “The electrification of vehicles and the ultra-high-mpg CAFE standards [also] will inevitably push the run-flat or zero-pressure game to evolve as OEMs look to remove the spare tires to save on weight and space.”

The ADAS Factor

If they haven’t already, virtually every aftermarket wheel and tire business will soon feel the impact of advanced driver-assistance systems (ADAS) designed to warn against such things as forward and lateral collisions, keep vehicles centered within their lanes, and apply emergency braking when collisions are imminent. Changes to wheel and tire sizes, offsets and even the weight of the overall package can confuse the ADAS sensors, processors and algorithms that compute the changing stopping distances, speed adjustments, braking forces and steering corrections required to avoid accidents.

SEMA and its industry councils, including the WTC, have been closely monitoring and researching those and other rapidly emerging ADAS technologies to help the aftermarket understand and embrace the change that’s coming.

“There are some new best practices that we’re discovering through the WTC and our ADAS forums,” said SEMA Vice President of Vehicle Technology John Waraniak. “For example, about 80% of the newer vehicles on the road from 2016 forward now require a reset of the steering sensor after a wheel alignment. Many in our industry are certainly familiar with wheel alignment as a mechanical adjustment after a modification to the wheel and tire sizing, but now you need to do a safety system alignment, which includes the steering angle and particularly two of the biggest ADAS features, lane-departure warning and forward-collision avoidance. Those are based on two now-ubiquitous technologies: cameras and radar. It all comes back to what we call functional safety compliance, which isn’t regulated by the government yet but is basically ensuring that the system works the way it
was intended.”

Now more than ever, manufacturers and retailers must pay close attention to matching appropriate wheel and tire packages to each vehicle’s ADAS specs, which can vary widely from model to model, said Scott Musser, director of sales for Ultra Wheel Company. He also serves on the WTC select committee.

“When it comes to 2017 or older vehicles, you still have a lot of the leeway that has always been present in selling aftermarket wheel and tire products,” Musser said. “But about mid-2017, some of the higher-end and newer-platform cars started to adopt ADAS technologies that included lidar, radar and sonar, and that is beginning to affect what you can and can’t do as far as keeping those systems working properly.

“A lot of installers are making the mistake right now of seeing a warning light come on that turns back off after a moment or two—let’s say five seconds—and thinking, okay, everything’s good and they can let the car go. But that’s not true.

“I know of one instance in which, thankfully, an end user wasn’t willing to accept that the light went off. In that case, as soon as the car was put into drive a ‘radar field reduced’ light would come on and, in a few seconds, turn off. The customer made the retail store dig and find out why.

“What was happening was that the pedestrian and accident-avoidance fields were being reduced from 15 ft. at park to about 3 ft. in drive—a dramatic change of 80%. That’s not good when you have a driver relying on those systems. As shops begin to move forward working with some of the ’18 and ’19 models, they’ll be seeing more of these systems.”

In Musser’s view, the entire aftermarket supply chain has a stake in getting ADAS right.

“Because who becomes liable if an accident happens?” he asked. “Even if it happens through gross negligence on the part of the consumer, they’ll blame the upgrade on the installer, the company that built the part, and the manufacturer of the vehicle. And when an OEM gets dragged into it, that’s where they throw their hands up into the air and no longer allow aftermarket parts on their vehicles. As an industry, we have to make sure we don’t do that to ourselves.”

Wheel Trends

In the case of wheels, that may mean reining in some of the more extravagant consumer tastes.

“If you’ve been to the SEMA Show, you’ve definitely seen that wheels and diameters are getting bigger,” Perronne noted. “That’s something we’ve seen not so much on the West Coast but more in the South—in Florida, for example. Then there’s a Central California look, too, and those I’d say are in the 24- to 26-in. range. Some guys go beyond that, but that just creates a useless vehicle, since even with 24s or 26s you’re pushing it with a truck. Still, we’ve seen some wheel companies come in with product in those diameters where you can actually have a load rating that’s not super sketchy and blow apart on the highway. They’re super expensive, but you’ll still see guys buying them.”

“Truck wheel sales are monster huge right now,” Musser echoed. “But let’s break out the wheel segments. There’s still your luxury performance, sport compact and trucks, which can also be broken into two segments. There are your lifted trucks that you saw all over the recent SEMA Show, and there’s also the emergence again of the slammed lowrider—the fullsize truck that’s down on the ground or on ’bags that can lower it all the way to the ground when parked. There’s also muscle, which is again broken into two segments, old and new. Of all those segments, the fastest growing seems to be the lifted trucks.”

Performance/Special Purpose Tires
Vehicle Segment-Share of Dollars
Off-Road/Plus-Size Tires
Vehicle Segment-Share of Dollars
Custom Wheels
Vehicle Segment-Share of Dollars
Small Car: 6% Small Car: <1% Small Car: 5%
Mid-Range Car: 21% Mid-Range Car: 1% Mid-Range Car: 17%
Upscale Car: 14% Upscale Car: 1% Upscale Car: 9%
Sports Car: 15% Sports Car: 2% Sports Car: 11%
Alternative Power: 1% Alternative Power: <1% Alternative Power: 1%
CUV: 7% CUV: 2% CUV: 7%
SUV: 11% SUV: 25% SUV: 12%
Pickup: 18% Pickup: 67% Pickup: 34%
Van: 3% Van: 2% Van: 2%
Classic: 3% Classic: 1% Classic: 2%

Example Parts

Snow/Winter Tires
Low-Profile Tires
Performance Tires
Reproduction/Vintage Tires
Other Wheels/Tire Products

Example Parts

Off-Road/Plus-Size Tires





Example Parts

Aluminium or Alloy Wheels
Carbon-Fiber
Composite Wheels
Beadlock Conversion Kit
Steel Wheels
Wheel Covers/Hubcaps

Growth in the small-truck market, including SUVs and crossovers, now accounts for 36% of the specialty tire market. Not surprisingly, midrange cares take the biggest shares of passenger tire sales.
 
Pickups and SUVs range supreme in the current off-road tire segment. Experts say that a greater percentage of new buyers are now venturing off the pavement. Again, the consumer shift toward pickups, SUVs and crossovers is reflected in the wheel market, with purchasers often opting for bigger sizing.

While many customers are opting for the biggest, strongest wheels possible, both Perronne and Musser said that the bulk of the wheel market remains 17- to 20-in. sizes. And while forged wheels are highly prized for their superlative strength, most consumers will find themselves satisfied with the latest flow-formed wheels, which are now lighter and stronger than previous iterations at a third of the cost of forged wheels. Consumer desires are also gravitating toward simpler, streamlined designs in basic aluminum, although a handful of colors are gaining in popularity.

“Probably the bulk of [truck] wheels are still black, but you are seeing more colors creeping in, with bronze and gray being good examples,” Perronne said. “Some of the wheel companies even offer custom wheels in whatever tint you want.”

Meanwhile, Musser said slammed trucks have advantages.

“Those are a little bit more forgiving with oversize wheels and tires when you keep to the same rolling diameter,” he said. “For the suspension modifications, with the digital controls and airbags, you can actually take them up to the original ride height and bring them back into compliance. No lights are triggered. So as long as you don’t try to lower it and drive, you’re good. If you do, the computer freaks out until you get it reset.”

But don’t ignore luxury sports cars, hybrids and electrics, which comprise a growing sleeper segment.

“The big thing right now is wheel weight, especially with vehicles like Teslas,” Musser said. “Customers are asking how much weight new wheels will add to their electric cars and how it will affect the distances they can drive. Tesla was really generous on its offsets. You can do some really nice work on those cars and not affect them that much. But keeping the weight down seems to be a big concern right now, and you’ll see that as more and more electrics and hybrids come along.”

Market Pressures

Entering 2019, a major question is how a new round of tariffs will impact the wheel and tire market’s bullish trendline. For now, industry watchers believe manufacturers can roll with the punches.

“Our industry seems to be afraid of the word tariffs, but tire manufacturers and tire dealers have slowly adapted to them since September of 2009, when President Obama implemented massive tariffs on Chinese tire imports through September 2012,” Ulrich asserted. “Many of the large tire manufacturers producing tires in China during that three-year time period have since built plants in or moved production to other low-cost countries, which minimizes the impact on today’s tariffs. Yes, Chinese tire exports to the United States will probably decline, but I suspect that overall consumer tire prices will not be directly affected by them even if the Chinese government doesn’t subsidize the new tariffs. They certainly weren’t in 2015, the last time duties were placed on Chinese tire imports. Tire prices need to go up anyway because of the rising cost of raw materials.”

On the wheel side, Musser said that it remains to be seen how businesses will fare with their consumers, who will likely experience moderate price hikes.

“The first part of President Trump’s tariff agenda affected us very little,” he said. “Ten percent was a minute hit that we could absorb. Some manufacturers tried to make the end consumer absorb the full 10%; others didn’t. But what’s going to be the determining factor is the part that was supposed to hit January 1. Although we have to see [how it plays out], right now it appears that all the wheel companies will be doing all right. The total endgame will be between 20%–25% if it it hits end users.”

Along with tariffs, the industry will be closely monitoring another phenomenon among tire retailers: mergers, acquisitions and consolidation of independents, according to John Zentz, senior vice president of sales for tire-equipment manufacturer Hunter Engineering.

“Several of the larger companies continue to acquire some of the smaller chains and even individual stores,” Zentz said. “That’s really been one of the big changes in our industry in the last 24 months. Some independent tire dealers are looking for an exit plan, and for them, that exit plan can be pretty good when they are acquired by one of the large companies.

“From the independent tire dealer standpoint, it’s going to be a little harder to compete. Some of the regional chains are getting really strong; some have a hundred-ish stores and they’ve done a really nice job of positioning themselves in certain markets. We expect that to continue, but the way the one-off tire store can compete is just to provide world-class customer service. And the ones that do that are the ones that are thriving. The independent tire dealer, I think, should aim to provide local customer service on a very personal level because that can be their greatest strength.”

For many retailers that will also mean recruiting and retaining skilled, knowledgeable workers—good people who, as the saying goes, are increasingly hard to find.

“The shortage of technicians is really going to be a challenge as we go into the next five to 10 years,” Zentz said. “Finding qualified people who desire to do that is something the industry has been wrestling with. We’re always looking for ways to try to grow technicians through training, but it will be a challenge for the industry,
no doubt.”

The bottom line is that the wheel and tire segment is trending toward further growth in 2019, with big changes also on the horizon. Those transformations can yield new opportunities for businesses that think smart about the future—tactically and technologically.

Modifying with confidence will require not only education on the supplier/retailer side of the market but on the consumer side as well. Retailers, especially, will be called upon to understand new technologies, communicate them to end users, and expertly recommend the specific wheel and tire solutions that will enhance styling, performance and safety for their customers. As Zentz summed up, “Technology itself is not the real disrupter. Not being customer-centric is the biggest threat to any business.”

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