After an incredibly robust 2022, high inventory levels and softening demand are putting the brakes on domestic medium truck tire market sales, according to several truck tire manufacturers and suppliers.
They discuss the challenges facing the market in this MTD exclusive.
MTD: 2022 was a remarkable year for medium truck tire demand, with replacement shipments in the U.S. growing by more than 20%, according to MTD research. Did that momentum carry over into the first half of 2023?
BRAD PERSONS, national sales head, commercial tires, Apollo Tyres Ltd: 2022 was an amazing year and served as a highwater mark for both original equipment (OE) and replacement tire volumes. If we go back to 2010, the commercial tire industry replacement tire volume has had a compound annual growth rate of 4.8% over the last 12 years. We expect the medium truck tire market demand to remain near all-time highs. The American Trucking Associations recently stated that freight tonnage indexes will likely stay strong and consistent throughout 2023. We expect the consumption of medium truck tires to continue to be at a similar rate from last year. However, many dealers stocked up on tires when there were shortages and are sitting on stocks they will need to deplete. We do see many opportunities and expect 2023 to be a great year for tire sales.
CHRIS TAVARES, executive director, commercial marketing, Bridgestone Americas Inc.: Industry and economic headwinds have cooled the full momentum of 2022 as we continue into 2023. However, we remain cautiously optimistic for the second half of the year thanks in part to new Bridgestone and Firestone products we have launched or size offerings we have expanded. While market demand for premium tires has slowed from the records of the past two years, Bridgestone has continued to drive industry growth in the retreading space through our Bandag business. The retread market at large is up year-over-year and Bandag has likewise seen an increase in sales year-over-year, as fleets continue to see the value of retreading in their operations. Bridgestone is encouraged on the long-term outlook of the TBR space as we continue to make investments for the future. In 2022, we announced a $550 million investment in our Warren County, Tenn., plant, as well as an additional $60 million investment in our Abilene, Texas, Bandag facility to support continuous growth in the U.S. and Canada.
AARON MURPHY, senior vice president, CMA LLC/Double Coin: With the slowdown in the economy, as well as increased inventory levels at manufacturers and dealers, the momentum has shifted backwards to a declining sales trend. We are seeing segments of the market, including OE, stay consistent with 2022 demand levels.
SHAUN UYS, head of Continental replacement truck tire, U.S., Continental Tire the Americas LLC: The market environment still remains difficult due to rising costs for materials, wages and salaries (and) energy and logistics, as well as the ongoing transformation of the automotive industry. Continental has been able to counter inflation-related rise swith price adjustments, optimized supply chains cost discipline and enhanced cyber security. In truck tires, we continue to maintain a strong network of sales
personnel to support our tire dealers, and our sales team takes a very active role in helping them grow their business. We want to show tire dealers how we can be their total solutions partner
ARMAND ALLAIRE, executive vice president, commercial sales USA, Giti Tire (USA) Ltd.: Sufficient data for the first quarter indicates a softening of the national market versus 2022. We can readily observe that an overambitious interpretation of demand caused oversupply when buying habits changed rapidly. The market will have to consume excess supply until demand normalizes. The key for market analysis is to define demand adjustments by dealer, by client and by market. Think nationally, but act locally. For dealers, observe your local market and adjust with focused logic. Avoid the pessimism of negative national messaging and deal with your client’s input. Ask what your clients want/need and intensify your role as a transportation adviser for them — assisting on fuel saving practices and reducing total lifetime cost with retreading.
TOM LIPPELLO, senior director, commercial marketing, North America, Goodyear Tire & Rubber Co.: Goodyear found lots of opportunity meeting and exceeding our customers’ needs over the first half of 2023. Supply chain and other market issues provided disruption, but almost across the board, the momentum we’ve seen recently has us very excited about our industry moving forward. We’ve seen growth in many of our key segments and our commitment is to lean into that growth and continue to deliver against the trust that our customers have in us.
KJ KIM, TBR marketing and sales director, Hankook Tire North America: Due to increased market inventories now, we expect replacement shipments to decrease in the first half of 2023 compared to last year. Though there has been a market decrease in 2023 compared to 2022, we expect a rebound, according to the U.S. Tire Manufacturers Association, for next year.
PETE SALVAN, vice president of sales, Prinx Chengshan Tire North America Inc.: We have seen our TBR sales slow down in the first half of 2023 due to our dealers having TBR inventory arrive at the end of 2022/early-2023 and then having to work through it in what has turned out to be a freight recession. This caused them to reduce their orders in 2023, even though our truck tire prices have fallen from last year because of the reduction in freight costs.
BRIAN SHEEHEY, senior vice president, Ralson Tire North America: While fleet tire demand did increase, we saw two related events drive a significant portion of that demand. First, there was a tremendous release of backlogged goods transported by ocean freight that cleared port logistics in a significantly faster timeframe than had happened over the previous 18 months. A large portion of these goods were ordered prior to — or just at the beginning of — the surge in inflation. Many companies placed larger orders to ensure their inventories matched demand as best they could by keeping their supply pipeline robust — a mitigating strategy to the delays and congestion of 2020 and 2021. The second event we experienced in early-2022 was a significant slowdown in European demand, as well as other regions’ demand diminishing. This slowdown had manufacturers recalibrating their production and supply to focus on the backorder demand in North America. As a result of these two events, tire shipments reached historic levels. However, dealers scrambled to find additional space, delayed shipments until space became available or canceled orders in their entirety. This also forced many manufacturers to store inventory that had not been planned or budgeted for. While dealer sellout was very good in the first quarter, manufacturer sell-in has been challenging as dealers and fleets work down their existing inventory and adjust for the temporary cost fluctuations and the effect it has on their bottom line.
AL EAGLESON, segment manager, TBR North America, Sailun Tire Americas: At the end of 2022, inventory levels rose at wholesale and at retail levels. A lot of backorders were filled by manufacturers. Dealers and wholesalers are still sitting on a lot of those tires. Plus, we’re seeing a downturn in the demand for trucking, which will obviously filter down to commercial truck tire sales. It was a slower first quarter of 2023 versus 2022, with signs of recovery throughout the balance of 2023.
NICK GUTIERREZ, sales director, GroundSpeed Tires, Sentury Tire USA: Yes, there was definitely continued momentum in GroundSpeed TBR’s segment in the first two quarters of the year. While there are several factors that have contributed to this, we suspect the increase in demand for goods and services/e-commerce has had a big impact, leading to more shipments and increased wear and tear on U.S. commercial trucks and tires. Due to recent U.S. legislation passing to improve transportation infrastructure, there has also been a rise in demand for medium and heavy-duty trucks, which will drive the truck segment’s momentum forward in 2023. Along with these factors, there has been a shift towards more sustainable transportation options, which has also increased the demand for fuel-efficient, low rolling resistance tires. All of these are notable TBR growth drivers.
JOAQUIN GONZALEZ JR., president, Tire Group International LLC (TGI): Due to inflation, the demand for logistics service has declined. Most distributors are focused on moving existing inventory and their sell-in has lagged on TBR for the back half of 2022 and into the first quarter of 2023. DAVE JOHNSTON, senior manager, commercial product and business development, Toyo Tire U.S.A. Corp.: 2022 was a terrific year for medium truck tires across the country. Replacement trucks were hard to find and the national fleet aged, driving up replacement tire market demand. This was great for commercial servicing dealers and Toyo Tires, resulting in a record sales year. The first quarter of 2023 ebbed from the steep climb of 2022, as the market appears to be stabilizing from an increased supply of tires across the industry.
DEMETRIC MASS, national product manager, truck tires, Yokohama Off-Highway Tires America Inc.: Demand remains high for replacement truck tires in 2023. Some fleets and owner-operators are awaiting new rigs, some have chosen to keep operating their existing equipment and we’ve even seen renewed interest in refurbishing pre-tier-four equipment. Whatever the motivation, keeping existing trucks on the road is good news for replacement truck tires and an opportunity to help truck owners improve the performance of those rigs with the latest tire technology.
DAN FUNKHOUSER, vice president of commercial sales, Yokohama Tire Corp.: 2022 was absolutely a banner year for the industry, but unfortunately, we’ve seen a bit of a slowdown through the first quarter of 2023. Dealer inventories are flush. At the same time, we’ve seen the movement of total freight falter. On the bright side, we continue to see positive replacement demand for our products and dealers have been effective at selling through their Yokohama inventory to end users. We’ve also seen an uptick in OE demand, so we’ll continue to balance our supply to meet the needs of our customers in all channels.
