Our recent checks with dealers indicate that retail sellout trends were flat to slightly down year-over-year in February 2025, following three straight months of positive results and slightly behind January results.
More specifically, independent dealers highlighted average sellout declines of 0.2% in February, compared to 0.7% growth in January.
Looking closer at volume for the month of February on a regional basis, the Southwest saw the strongest trends, with volumes coming in up 3.4% on average, while the Northwest, Midwest, and Southeast were among the regions that experienced low-single volume declines.
From our view, we have seen continued strong trends from consumers with winter weather driving catch-up maintenance and tire volumes, with trends coming in positive on a year-over-year basis, on average, for the last three months.
We believe in February dealers saw consumers begin to digest the impacts of winter weather as parts of the country started to see warmer weather. Looking ahead to the spring season, we see March had a minus-1.5% comp. We were not surprised to see a potentially positive comp as tax refunds hit consumer wallets.
Miles driven still up
Given volatile industry conditions due to cost inflation and other macroeconomic factors, we look at several data points to assess the health of automobile travel demand, which correlates to tire usage and wear.
Looking to miles driven over the last month, which has a significant correlation with the need for a new set of tires, trends were positive low-single digits during February, compared to slightly positive gains during January.
More specifically, our Miles Driven Momentum Index registered a 1.4% year-over-year increase in February, which follows a 0.1% increase in January. Trends in March were off to a solid start, with the first week up 1.8%, but are going up against a healthy comp of 0.5% growth in March 2024.
A look at raws
Turning to raw material costs, the basket of raw materials to make a basic replacement tire grew 1.8% on a year-over-year basis during February and fell 1.7% from January levels. We note this follows a 5.3% year-over-year average increase during the fourth quarter of 2024 following a 10.5% year-over-year average increase during the third quarter of 2024.
Holding raw material pricing constant would equate to a 1.6% year-over-year increase in input costs to build a tire in the first quarter of 2025 and a 1.1% sequential decline from the fourth quarter of last year.
In analyzing specific input costs, natural rubber costs grew 20% on a year-over-year basis in February 2024, as supply remains pressured in Southeast Asia. Oil prices decreased an average of 8.5% year-over-year in February.
Among other price movements, we note synthetic rubber costs grew an average of 11.4% year-over-year in February, carbon black prices fell 8.6% year-over-year and tire fabric/cordage costs fell 4.8% year-over-year.
Taking a broader look at our tire raw material index, we note the index fell 9.7% in 2023 from 2022 levels, while our index finished out 2024 up 7.1%. Given the rapid price deceleration in 2023 following two years of price appreciation, we are not all surprised to see raw material costs increase on a year-over-year basis.
We view the year ahead as a year of moderating price increases as the index laps year-over-year increases, which we view as a potentially welcome shift towards stability for the industry.
What dealers are saying
Dealer commentary suggests consumer demand for PLT replacement tires was slightly down year-over-year on a net basis compared to February of 2024.
We believe dealers experienced a period where trends slowed down from their normal winter pick-up as weather started to improve in some parts of the country. With that in mind, customers are also continuing to trade down to lower-priced tires, with tier-three returning to the top position in February, following a slight trade up to tier-two in January.
Looking to the best and worst performers from a mix point of view, our recent survey of tire dealers shows tier-three brands as the most in-demand segment, marking the ninth out of the last ten months that tier three has held the top spot.
Historically, tier-two brands have been the most in-demand segment in our decade-plus history of our monthly survey. We believe the February 2024 result is an indication of the type of buyer that is in the marketplace, as we continue to see consumers trade down to lower performance, lower priced tires in February.
We continue to see tier-one tires struggling. With consumer balance sheets negatively affected by inflation and high interest rates, buyers are trading down for cheaper tires.
We traditionally see a high level of volatility in our month-to-month tier rankings, but expect tier-two brands to be the most in-demand segment long-term, offering consumers a balance between cost and performance.
