Tire dealers tell us that retail sellout trends were down low single digits year-over-year in October, lagging September results. Independent dealers highlighted average sellout declines of 1.7% in October, compared to a 1.1% increase in September.
Overall, the trends are slightly down for the entire third quarter.
Regionally, the best news was that dealers in the Southwest were flat, while others were down slightly. The Northwest reported the weakest volume trends, with sellout down a moderate 2.1% year-over year.
So after a quiet summer, September and the fall season started out on the right foot — but tire dealers indicted those trends were short-lived, with seasonally warm weather likely distracting replacement tire buyers from the upcoming winter season. This ultimately led to another month of deferment.
Looking forward we note that November has a neutral comparison, as retail sellout was flat in November 2023. Given another month of deferment, and the weather that is starting to turn and result in snow in some regions, plus with another the healthy miles driven report from October, we wouldn’t be surprised to see flat or even slightly positive sellout volumes in November.
Miles driven ticks upward
Speaking of miles driven, those numbers once again look favorable. The mileage trend was up mid-single digits in October, and that’s coming off a third quarter with a low single-digit increase. The October Miles Driven Momentum Index was up 5.5% in October, following a 1.2% increase in September.
We continue to see miles driven trends that remain ahead of pre-pandemic levels, and we expect to continue to see flat-to-slightly-elevated trends going forward.
The raw material question
The price of raw materials needed to build a basic replacement tire has been on the rise in 2024. In the second quarter the cumulative prices increased by 9.5% year-over-year, and in the third quarter the increase was even higher: 10.9% year-over-year. If raw material prices were to hold steady, it would add up to a 10.1% year-over-year increase in input costs for the fourth quarter — and a 1.8% rise from the third quarter.
One interesting figure is specific to oil prices, which had been on the rise throughout 2024, but then dipped in August and then fell again by 21% in September. On the flip side, natural rubber costs increased 73% year-over-year in September due to supply pressures in Southeast Asia.
The price changes in other inputs — synthetic rubber, carbon black and tire fabric/cordage — were more moderate, with synthetic rubber up 13.5%, while carbon black and tire fabric/cordage dropped 0.8% and 3.3%, respectively.
The report from dealers
One-third of our tire dealer contacts saw negative demand trends in October, a decline from the 26% net positive demand in September. Consumer deferment and trade down have been consistent themes in recent months, we believe that continued into October. As consumers continue to trade down to Tier 2 and Tier 3 tire brands, tire dealers continue to report soft trends for premium, Tier 1 products.
As further proof of the trade-down, Tier 3 brands were the most in-demand in October. That’s six straight months with Tier 3 tires being the top drivers. We can’t help but continue to note this is different from our long-term trend where Tier 2 brands are the most in demand by consumers in more than a decade worth of our surveys.
In October, Tier 2 tires were in second place in our tier rankings, while the premium Tier 1 tires remained in last place in these rankings for a third consecutive month.
We see this as an indication of the type of buyer who is in the marketplace. Even though we do see a high level of volatility in our month-to-month tier rankings, we still expect Tier 2 tire brands to be the most in-demand of all the offerings since they offer consumers a balance of cost and performance.
