Years ago, a research firm conducted a study of passenger- and light-truck tire buyers and determined that consumers fell into one of three categories: brand, price or service. Brand buyers were obviously loyal to the name on the sidewall, while the only loyalty of price buyers was to the cheapest option. Service buyers basically took the recommendation of their mechanic, so brand and price were secondary. Regardless of the motive behind the purchasing decision, the influx of low-cost offshore tires has made an impact on the industry.
A recent ruling by the United States International Trade Commission (USITC) to assess countervailing duties on passenger and light truck tires imported from China was ultimately the result of a complaint filed by the United Steelworkers (USW). The USW alleged that Chinese tire manufacturers were selling tires at less than fair value, which in turn led to a downturn in domestic manufacturing and the loss of jobs. Ultimately, the USITC imposed antidumping tariffs on passenger and light truck tires produced in China for the second time since 2008.
Interestingly enough, truck tires have appeared to stay above the fray and out of the investigations by the USITC or the Dept. of Commerce. The data on Chinese market share for replacement truck tires varies greatly, with one source reporting almost 33% and another estimating it at around 10%.
Either way, these low-cost imports are making an impact, but not enough for the USW to believe it is costing them jobs. If and when that line is crossed, we can expect to see investigations into similar dumping allegations.
Unlike the passenger- and light-truck tire markets, the medium-truck tire industry is completely different. Cost per mile, performance, retreadability, and fuel mileage are the top priorities, which explains why the big three (Bridgestone, Goodyear, and Michelin) and their affiliated brands still account for almost 60% of the U.S. replacement market and 25% is associated with other name brands.
But that doesn’t mean the threat can be ignored. Retreaders are reporting that low-cost new radial truck tires are seriously hurting their cap and casing sales. If that trend continues, then it could have a negative effect on the casing market as demand goes down.
For those that succumb to the temptation of low-cost imported radial truck tires, expectations for performance and retreadability must be realistic. In some cases, there might be a retread in the casing, while others won’t make it past initial inspection. And when it comes to casing credits, there is virtually no value after the original tread is worn as most retreaders are reluctant to retread them.
The short-term savings associated with offshore radial truck tires are going to have long-term costs for the industry. As the cap and casing business gets increased competition from low-cost new tires, the value of casings will take a hit. Retreaders will either raise prices to account for the lost revenue or be forced to accept smaller margins on national account sales. Eventually, the retread industry as a whole will be threatened, and fleets could be forced to choose between high-cost and low-cost new tires.
And that’s not good for the environment or the bottom line.
Kevin Rohlwing can be reached at [email protected]