The Tire Market: Post-Covid Uncertainties
When COVID-19 first reared its ugly head in March 2020, there was an immediate impact on travel. As lockdowns were initiated and people sheltered in place, they drove less; working from home replaced the daily commute, and vacation plans were shelved amongst the uncertainty.
Nearly three years into the pandemic, life has returned to some semblance of normal — but uncertainties remain for the tire industry. With inflation rates jumping to 8.3% in 2022, the highest in decades, consumers’ disposable income has taken a beating. Even as Americans adjust to a new post-Covid normal, many are scaling back travel plans this year, and delaying large purchases like automobiles until interest rates drop.
Covid & Supply Chain Issues Impact Tire Market
The past few years have been rough for tire manufacturers. Even before Covid hit, sales had cooled thanks to high inventories and a mild winter that affected the sale of snow tires and all-weather tires.
As the pandemic spread and people stayed home, many automakers scaled back vehicle production as consumers held off on new vehicle purchases.When demand ticked back up, supply chain issues negatively impacted the industry. With 17% of commercial tire volume originating in China, production disruptions in Asia created lengthy delays. Those in the market for new cars and trucks faced limited inventory and often had to wait months to get their hands on a vehicle.
Tire manufacturers and dealers suffered, as well. As consumers curtailed their driving habits, fewer miles on the road translated to less wear and tear on tires. This lengthened the typical replacement cycle. In order to compete with lower demand, dealers and distributors dropped their prices, which meant lower profit margins on already meager sales.
Wholesalers cut back on delivery frequency and adjusted their routes during Covid. While certain essential industries — trucking, agricultural, municipal fleets, and government agencies, for example — didn’t see large reductions in miles driven, other industries cut back.
Pandemic Creates New Buying Habits
Covid created long-lasting shifts in consumer behavior. Instead of visiting brick and mortar stores in person and risking exposure to the virus, people turned to online shopping. Shopping from the comfort of home is convenient — but it also means less driving.
Even as restrictions eased, people have continued to make purchases over the internet. In-store sales are up, but it’s been a slow recovery. It’s unclear whether this newly entrenched behavior will last.
Growth in Global Tire Market Predicted
Despite these uncertainties, there is promising news. The global auto parts market is forecast to grow 4% by 2027, and tires represent the largest share of aftermarket automobile parts sales.
According to data released on Feb. 6, 2023, the global off-road tire market is expected to grow from $459.6 billion to $849.3 billion by 2030. That represents a compound annual growth rate (CAGR) of 7.3% and bodes well for the tire industry.
The global tire retreading market is expected to see gains, as well. Retreading involves replacing old and worn out tire treads with new casings. Analysts are forecasting a 2.0% CAGR by 2028. Similar growth is expected for global all-season tires.
Reasons for Optimism
Certainly, the growth forecasts are encouraging. Generally speaking, tires are poised for growth due to several factors, including:
- Increased Vehicle Production. Covid may have slowed down production, but overall, worldwide vehicle production grew from 58 million in 2000 to 80 million in 2022. There will always be a demand for automobiles, which means there will always be a demand for tires.
- Drives are More Cognizant of Safety. Automobile accident rates have increased across the globe in recent years. While this isn’t good news, it does mean that drivers have become more attentive to basic maintenance of their vehicles, including new tires.
- Stringent Vehicle Safety Regulations. International organizations and governmental agencies are also concerned with safety, and are increasingly adopting strong regulations on tire quality and servicing.
Inflation remains a fly in the ointment, of course. While the Feds have taken drastic measures to slow down inflation, their efforts have resulted in steep increases in interest rates, which are meant to curb consumer spending. How quickly inflation will cool and sales will increase is impossible to predict.
Overall, despite the uncertainties, we believe there is room for cautious optimism when it comes to the tire market. Blackburn remains committed to providing quality OEM wheels, hubcaps, and accessories to our partners nationwide.