For a third consecutive month, retail tire sellout trends were in positive territory. In January 2025, dealers indicated sellout growth of 0.7%. That’s a slight slip from the 1.1% growth in December, but it’s still a gain from the January 2024 report.
Tire dealers in the Northeast saw the strongest gains, with volumes up 6.3% due to heavy snowfall in the region. The results were still positive in the Northwest and Midwest, with low-single digit volume trends, while tire dealers in other regions saw flat or negative volume trends. The Southwest reported the weakest market, with a 1.3% decline in year-over-year volume.
Dealers say winter weather events drove this uptick in tire sales in January, as drivers in affected areas wanted to make their vehicles would function properly in the winter weather conditions. Looking ahead, we notice that February has a flat comparison, and we expect if the weather cooperates, we could see another month of flat-to-slightly-up volumes.
Miles driven data showed another slight gain in January. The increase of 0.1% was softer than the 1.1% increase recorded in December.
Raw materials continue climb
The cost of raw materials needed to build a basic replacement tire continued to edge upward in January, with prices up 6.2% during the month, an increase from the 2.3% recorded in December. This January gain follows a 5.3% increase during the fourth quarter of 2024, and a 10.5% year-over-year increase in the third quarter.
Holding raw material prices flat would equate to a 4.7% year-over-year increase in the first quarter, and it would mark a 2% sequential increase over the fourth quarter.
Natural rubber costs continue to rise by double-digit margins, with a 29% year-over-year increase in January. The pricing of other inputs is more measured, with oil up 0.5% year-over-year and synthetic rubber costs up 12.4% year-over year. Carbon black and fabric/cordage prices both dropped in January compared to their year-ago comparisons, down 2.3% and 8.1% respectively.
For the full year, our raw material index rose 7.1% in 2024 compared to the prior year. In 2023, the index fell 9.7% from 2022 levels.
Given the rapid price deceleration of 2023 following two years of pricing gains, we’re not that surprised to see raw material costs moderate and increase on a year-over-year basis. We view this as a nod toward stability, and a positive, given the volatility experienced since 2020.
Winter driving demand
Dealer commentary suggests consumer demand for passenger and light truck replacement tires was slightly positive on a net basis compared to January 2024. And that’s despite the fact that 10% of our independent tire dealer contacts said they experienced a drop in demand in January 2025.
The upside comes from those dealers seeing gains due to recent winter weather events. Their boosts in demand are outweighing the declines in other parts of the country. Dealers experiencing gains from winter storms are also reporting healthy gains in volume.
But one thing remains consistent — consumers are continuing to trade down from premium tire brands.
A change in the ranks
But even in that trend, there was a bit of movement in January 2025. After eight straight months of tier-three tires being the most sought after brands, tier-two took over the top of the demand chart in January. That matches the historical trend of our decade-plus of monthly surveys.
Tier-three tires fell to second place. We believe tier-two brands saw strong results during the month as consumers were looking to balance quality with price while also facing winter weather challenges. Whether tier-two tires remain in the lead remains to be seen. We traditionally see a high level of volatility in our month-to-month tier rankings.
We continue to see tier-one tires struggling in the market, with consumer balance sheets negatively affected by inflation and high interest rates. The result is consumers are choosing less expensive tires.
