‘Signs Point to Yes:' Six Questions Answered as MTD Peers Into the Future
Readers of a certain age will remember the Magic 8-Ball, that strange, plastic toy that provided instant answers to those all-important questions (“Will I ace my math test?” “Will I win the lottery?” “Will the Browns ever make it to the Super Bowl?”)
Granted, most of those answers were - and still are - somewhat cryptic, reinforcing my long-standing theory that nobody should seek advice from the Magic 8-Ball before making big, life-changing decisions.
Before you ask, “Where is he going with all of this?” I thought it would be fun to apply Magic 8-Ball-like answers to several tire industry-related questions that have been on my mind and could very well be on your mind, too. (Kids, don’t try this at home!)
I also have added some commentary to back up my predictions.
Question: Will the U.S. government levy tariffs on consumer tires made in South Korea, Taiwan, Thailand and Vietnam?
Answer: “As I see it, yes." The Department of Commerce recently announced preliminary determinations in the antidumping investigation of passenger and light truck tires exported from South Korea, Taiwan, Thailand and Vietnam to the U.S. I have no doubt that tariffs will be applied to these tires. On top of that, it also looks like tariffs on Chinese-made consumer tire exports will remain in place indefinitely.
Question: Will we see more price increases?
Answer: “It is certain.” A number of tire manufacturers hiked consumer tire prices during the last two months, citing a variety of reasons. (These things always happen in waves.) I have to think that while unspoken, anticipation of the current tariff situation was one driver behind these decisions. Raw materials were another factor as natural rubber prices are expected to climb. And inventories are tight right now.
Question: Will COVID-19 continue to cast a cloud over our industry?
Answer: “Cannot predict now.” Ultimately, tire demand is a function of consumer confidence, which is still on shaky ground. The successful distribution and acceptance of COVID-19 vaccines should help alleviate the motoring public’s concerns, and a sustained decline in infection rates will help, too. Business rebounded last summer, when stay-at-home orders were relaxed and pent-up demand uncorked. But next time around, we need it to stick.
Question: Will mergers and acquisitions increase?
Answer: “It is decidedly so.” Last year, there was no drop-off when it came to independent tire dealerships buying - or merging with - other tire dealerships, the latest big pairing being the union of Town Fair Tire Centers and Mavis Tire. (Combined, Town Fair and Mavis have more than 1,000 outlets.) Outside entities also continue to make in-roads into tire retailing, illustrated by the recent acquisition of McLea’s Tire & Automotive Centers, a five-store, independently owned dealership, by AAA Northern California, Nevada and Utah. However, an acquisition rivaling the magnitude of Meritage Group’s purchase of Les Schwab Tire Centers Inc. is unlikely to happen in 2021. (At that scale, you’re getting into some rarefied air.) It also should be noted that alternate approaches, like joining franchise networks or enrolling in program groups, will continue to be attractive options for smaller dealerships that have ambitions to grow, but might lack certain resources. (On that note, it will be interesting to track the roll-out of Tire Discounters Inc.’s franchise program, which MTD first reported on last September.)
Question: Will e-commerce and other retail platforms edge out independent tire dealers as the preferred choice for tire buyers?
Answer: “Don’t count on it.” More customers than ever are shopping for tires online. More are buying tires online. But I would guess that only a microscopic percentage of these customers have mounting and balancing machines in their home garages. (Magic 8-Ball, can you help with this one?) Tires have to be installed and serviced by people. And nothing beats the level of service that you provide. Several tire manufacturers have described their visions for future mobility infrastructures. Some have started to pilot new programs. But all of them understand that no move into the future will be possible without your buy-in and help. Your place is assured.
Last but not least, here’s my final question: “No matter what the new year brings, will independent tire dealers continue to be the preferred option for tire buyers?”
The answer to that one is simple: “Signs point to yes” - as they always have and always will.
On behalf of the MTD team, I hope 2021 turns out to be the best year in your company’s history!
If you have any questions or comments, please email me at [email protected].
