“The U.S. tire market is still being plagued by many of the same issues that it faced at this time last year,” says John Healy, author of MTD’s monthly Your Marketplace column and managing director and research analyst at Northcoast Research Holdings LLC.
In part one of an exclusive interview that appears in MTD's 2025 Facts Issue, Healy looks back on 2024 and discusses critical developments and trends that will help shape the tire industry in 2025. (Editor’s note: This interview was conducted several weeks before the 2025 Facts Issue went to press.)
MTD: How would you describe the overall state of the U.S. tire market today versus where it was 12 months ago?
Healy: Dealers seem to still be in a destocking rather than restocking mode, as prices remain high and month-to-month consumer-related activity seems hard to predict. Consumers are still faced with inflationary and macroeconomic pressures, forcing them to trade down into the lower-tier tire segments, as well as continuing to defer their tire maintenance, causing sellout trends to lag.
MTD: You’ve reported that tire dealers have been struggling with consumer tire sellout. What do you attribute this to?
Healy: To some degree, it’s an answer of the consumer and weather. As it relates to weather, we note winter 2023/early-2024 was a mild one. So far, the 2025 winter weather is off to a strong start, with strong snowstorms in the Great Lakes and Northeast regions. The National Oceanic and Atmospheric Administration is predicting wetter-than-average conditions in the entire northern tier of the U.S., but drier conditions in more southern parts of the country. There have been back-to-back, relatively “green” winters, allowing consumers to delay replacements potentially further than anticipated. If weather trends cooperate, we could see a catch-up period, heading into 2025.
In addition to this, pricing has been another headwind to sellout trends as consumers opt for lower-priced tires. Beyond this, rising tire prices and broader stress on the consumer wallet have also had an impact. We feel a major reason that sellout trends have been pressured has been because of consumer trade-down and deferrals.
Consumers are opting for lower-priced tires as they look to balance value and tire performance where the gap in performance between higher and lower tier tires has narrowed a bit. The other half of it, consumer deferrals, has been a continuing trend in the industry. Simply put, tires are an area where the consumer is deferring purchase until necessary.
MTD: You mentioned the movement of consumers to lower-tier, less-expensive tires. Do you expect this to continue in 2025 and if so, why?
Healy: Unless tire prices reset lower, we would say yes. We would expect to see the trend of consumers trading down to lower-tier, less-expensive tires to continue as we roll into 2025. For many years, we have always heard the tire business described as a tier-one to tier-three range. Lately, industry contacts have been talking about the tire market in four tiers. There has been a view among the industry that the product quality gaps between each tier have become a bit narrower and sometimes harder to distinguish between, leading many consumers to trade down to value-driven tires. And we believe that this trend will continue.
Additionally, we feel many dealers would rather convert a sale than simply miss out on one and as such, we have seen more and more dealers begin to increase their product assortment to carry more private label or alternative-brand products.
MTD: Large tire dealerships used acquisitions to get even bigger in 2024. Do you expect to see an acceleration of tire dealership mergers and acquisitions (M&A) in 2025 and if yes, why?
Healy: We expect to see an acceleration of tire M&A in 2025. There is a lot of uninvested capital out there — dry powder is elevated in private equity — and rates have started to move lower. As it relates to dealerships, we think the business remains a good one. The tire and service businesses are stable and over the long term, have proven more resilient than some might think. Given the natural benefits of scale — as well as an aging of the dealer owner base and perhaps a void of interest amongst younger generations to run the operations — we would not be surprised to see activity pick up a bit.
MTD: Three tire manufacturers — Yokohama Tire Corp., Sailun Tire Americas and Zhongce Rubber Group Co. Ltd. (ZC Rubber) — broke ground on new plants in Mexico in 2024. Do you think more tire manufacturers will invest in production facilities in the U.S., Mexico and Canada during 2025 and in the years that follow? What are some of the factors that will drive this?
Healy: To some degree, this is a hard question to answer without taking into account cross-border political dynamics. That said, assuming no new tariffs and a continuation of trade agreements, we believe more manufacturers will continue to invest in more production facilities in the NAFTA zone. Proximity of having a manufacturing base in the NAFTA zone helps service levels broadly for U.S. dealer networks. Being able to respond quickly to local demands can help manufacturers ensure prompt delivery of what product is needed at a faster pace than if it was imported overseas. All this considered, we would not be surprised to see some investments more focused on in-country efforts. We note there have been numerous announcements in the past 12 months about expansions or plans to build in the U.S. directly.
Earlier this year, British tire start-up Enso announced plans to build a $500 million manufacturing plant in the U.S., aiming to produce 20 million tires annually for EVs. Additionally, Hankook Tire America Corp. has implemented a plan to more than double production capacity in its Tennessee facility, while Continental AG announced the construction of its first fully owned tire distribution center in the U.S. in September.
Stay tuned to www.moderntiredealer.com for the next installment of this interview.
