Distributors Deal With Product Proliferation as Demand for Performance Tires Surges

PALO ALTO, Calif.--July 26, 2004--Responding to the North American consumers' demand for a wider range of tires, manufacturers are flooding the market with stylized high performance as well as larger-sized tire lines for passenger cars and light trucks. To tackle the resulting market proliferation, distributor networks are challenged to tighten inventory control, maintain sufficient space as well as promote customer awareness. The increase in product variety challenges manufacturers as well. An expanded product offering has led to higher development costs; shorter production runs and necessitates a higher observance of industry trends to ensure proper inventory management throughout the distribution channel.

New analysis from Frost & Sullivan (http://www.transportation.frost.com), covering the North American Tire Aftermarket, reveals that revenue in this market totaled $12.56 billion in 2003 and projects to reach $17.21 billion in 2010.

Though manufacturers, distributors and retailers can increase profit margins by leveraging toward the surging demand for performance tires, they are compelled to keep prices down in order to compete with warehouse-type distributors offering discount prices.

"As manufacturers focus on retail stores and independent channels to push specialized tires that can yield higher margins, the number of units sold through warehouse clubs and mass merchants is a cause for worry since it depresses overall industry pricing," says Frost & Sullivan senior industry analyst Mary-Beth Kellenberger.

Consumers are comfortable purchasing tires from these warehouses instead of specialty tire retailers as they are able to educate themselves about product distinctions through the Internet.

To counter this, manufacturers need to offer intense channel product education initiatives that clarify tire performance characteristics and empower consumers to purchase based upon key performance criteria versus brand familiarity.

Though the Internet is a powerful tool that increases a product's transparency, direct involvement with consumers also helps companies better position their products. Further, by interacting with customers and helping them get the best value for their money, tire installers can foster long-term trust and respect.

Direct consumer interaction is also an opportunity to get the message of tire safety/maintenance across to consumers, who despite intense campaigns have not yet accepted their role in tire maintenance. The enforcement of the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act calls for improved product quality, design, endurance and performance. It also requires manufacturers to target buyers with tire safety/maintenance messages.

Since the introduction of the TREAD Act, tire manufacturers have been solely focused on tire safety and environmental issues related to tire manufacturing -- storage and recycling have been sidelined. Manufacturers are cognizant of their products' impact on the environment but must be constantly reminded to consider options that are less harmful to the environment.

"Despite challenges, the tire industry is poised for growth in unit demand and consequently revenue dollars largely in part to the increasing number of vehicles taking to the roads every year," says Kellenberger.

The general decline in the state of roads due to harsh weather conditions and the government's lack of timely management of road infrastructure contribute to increased tire wear and tear, and translates into tire replacement. However, the greatest factor behind the growth continues to be consumer demand for larger, higher-priced performance-oriented products.

The North American Tire Aftermarket study, part of the 9801 subscription, analyzes the U.S. and Canadian tire aftermarket, under the categories of passenger cars and light trucks to provide comprehensive information on market share shifts due to factors such as financial circumstances and product quality. It also discusses emerging technologies and designs, and identifies evolving purchasing trends and demands of consumers. Executive summaries and interviews are available to the press.

Frost & Sullivan, a global growth consulting company, has been supporting clients' expansion for more than four decades. Our market expertise covers a broad spectrum of industries, while our portfolio of advisory competencies include custom strategic consulting, market intelligence and management training. Our mission is to forge partnerships with our clients' management teams, to deliver market insights, and to create value and drive growth through innovative approaches. Frost & Sullivan's network of consultants, industry experts, corporate trainers and support staff spans the globe with offices in every major country.

North American Tire Aftermarket

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The following is a list of key industry participants: 5ZIGEN USA INC.; Accuride Corp.; Ace Alloy Wheel; ADR DESIGN; Advanced Motorsport Solutions; AEZ Leichtmetallrader GmbH; Alcoa Inc.; Allied Wheel Components; ALT Wheels Inc.; Amcast Industrial Corp.; American Eagle Wheel Corp.; American Racing Custom Wheels; Arelli Alloy Wheels; Arospeed Inc.; ArvinMeritor Inc.; Autotech Systems and Accessories; AXIS Wheels; BBS of America Inc.; Budnik Wheels Inc.; Center Line Wheel Corp.; Cobra Wheels; Cragar Industries Inc.; Dayton Wire Wheels; DAZZ MOTORSPORT; Dexter Axle Co.; DM Tech America Inc.; DOA; Fikse USA Inc.; Fittipaldi Design; Goodyear; Hayes Lemmerz International Inc.; HRE Performance Wheels; Impex Motorsports; Kaizer Motorsports; KINESIS MOTORSPORT; King Bear Auto Service Center; KMC Wheel Co.; Konig; Lexani Wheel Corp.; MAS Alloy Wheels; Maxxim Alloy Wheels; Meineke Discount Mufflers; Midas Inc.; MIM; Mola Design; Momo Automotive Accessories Inc.; Motegi Racing; NAKAYAMA RACING SPORTS; Neeper/Niche; O Z SpA; Panther Custom Wheels; Polo Road Wheels; Prime Wheel Corp.; Rage Wheels Inc.; Rim Stop Inc.; RONAL USA; Sacchi Wheels; Speedline America Corp.; Superior Industries International Inc.; Team Dynamics Light Alloy Wheels; Tenzo Racing Sports Inc.; TSW Alloy Wheels; Tuffy Associates Corp.; Tunex Inc.; Ultra Wheels; Weld Wheel Industries; Wheels Now Inc.; Zenetti Wheels.

Keywords in this release: tire, aftermarket, North American, performance tires, Transportation Recall Enhancement, Accountability, and Documentation Act, TREAD Act, research, information, market, trends, technology, service, forecast.