For a second straight month, tire dealers recorded positive sellout trends of around 1.1% in December. That’s a slight uptick from November, when the growth was more moderate at 0.7%.
The cause: the appearance of winter weather. Dealers reported that was the primary driver of tire sales during the month. Three regions in particular reported volume growth in the mid-single digits during December: the Northeast, Southeast and Midwest. Generally, the other regions saw negative volume trends in December. The weakest numbers were reported in the Southwest, with volumes 3.8% lower year-over-year.
Looking ahead, January has a weaker comparison — it was slightly negative — so we’d expect that if the weather continues to cooperate, we would volumes from flat to up slightly.
A helpful holiday
Miles driven trends bounced higher in December 2024, too, after a flat report in November. Our Miles Driven Momentum Index registered a 1.1% year-over-year increase in December, an improvement from the 0.3% decrease the previous month.
We believe miles driven was positively affected by holiday travel trends. AAA estimated 107 million Americans drove to a destination at least 50 miles from home for the holidays — an increase of 2.4% from the previous year.
Raw materials status report
In looking at raw material prices, the cost of materials needed to build a basic replacement tire increased 6.6% year-over-year in December, a drop of 0.7% from November prices. This brings us to a 5.3% year-over-year increase for the fourth quarter of 2024, and follows a 10.5% year-over-year increase in the third quarter. Holding these prices steady would equate to a 1.9% year-over-year increase for the first quarter of 2025.
The rise in natural rubber prices was the most notable in our latest analysis, as those costs increased 49% year over year in December. Synthetic rubber costs also increased — by 11.5% — but the prices of other inputs all dropped during the month using that same year-over-year comparison metric.
For all of 2024, our tire raw material index was up 7.1% on a year-over-year basis. In 2023, the pricing index had dropped 9.7% from 2022 levels. Given the rapid price deceleration after two years of price appreciation, we are not surprised to see raw material costs moderate on a year-over-year basis. We see this kind of stability as a positive for the tire industry given the volatility we have experienced since 2020.
A look at demand
Consumer deferment and trade-down have been consistent themes in recent months, but the arrival of winter weather in more areas of the country in December prompted some consumers to quickly play catch up with auto maintenance and tire purchases. As a result, 27% of independent tire dealers reported positive demand trends in December, about the same as the 28% who reported gains in November.
Shoppers continue to trade down when purchasing tires and our latest survey shows tier-three tire brands remain in the lead and in the most demand at the sales counter. This marks the eighth straight month of tier-three being at the top of our charts.
Tier-two tires were again in second place. And while tier two historically leads our demand survey, these tires have been in second place for three months in a row.
We continue to see tier-one brands struggling, with consumer balance sheets negatively affected by inflation and high interest rates. Those factors are prompting consumers to trade down for less expensive tires.
A reminder that we normally see a lot of volatility in these month-to-month tier rankings, though we noticed that 2023 closed with three straight months of tier-one tires being the least in demand and that pattern repeated itself at the close of 2024.
Still, we expect tier-two tires to be the most in-demand segment long term, as they offer a balance of performance and price.
