Future Tire Market Called Flat

WASHINGTON--Tire shipments may be flat over the next few years as the Firestone recall has resulted in motorists replacing their tires now instead of later.

“While the recall bolstered shipments in 2000, it will essentially have ‘borrowed’ from shipments in 2001 and 2002, as many tires that would have normally been replaced in those years will be replaced in 2000. As a result, replacement passenger shipments in total for 2001 are anticipated to decrease by about 2 percent and then pick up again in 2002 to the 203 million unit mark,” according to the Rubber Manufacturers Association (RMA).

“Shipments of P-Metric tires in 2000--those tires involved in the recall campaign--will undercut replacement shipments over the next couple of years as tires that would have been replaced in 2001 and 2002 are being replaced in 2000. Consequently, shipments forecast for 2001 will fall just short of 2000’s record levels. Shipments in 2002 will once again be at historic highs, as domestic and global economic factors resume their predominant influence,” the RMA said.

The RMA’s Tire Market Analysis Committee (TMAC) has again assessed the twin impacts of the tire recall effort and the softening of the domestic economic climate taken collectively over the upcoming three-year period. Overall, the tire industry in 2000 will experience its fifth record year in tire shipments but owes much of this year’s growth to the more-than 6.5 million P-Metric tires replaced as part of the recall effort.

“The tire industry’s continued contribution to the nation’s economy is reflected in this year’s record numbers as well as future tire industry forecasts,” said RMA President and Chief Executive Officer Donald B. Shea. “Tire manufacturing is an important part of the American economy and we anticipate the continued growth of this industry.”

TMAC cites the Gross Domestic Product (GDP) and Industrial Production Index (IPI) as the basis for continued strong growth in tire shipments, where leading economists expect the GDP to grow by 5.2 percent in 2000 and then level off to about 3.5 percent for 2001 and 2002. Similarly, the IPI is anticipated to also be strong at 5.4 percent in 2000 and then remain level at about 3 percent for the following two years.

Key projections for 2000 include:

• Original Equipment Passenger Tires: 61.6 million units are projected to be shipped in 2000 as vehicle sales set a record year of more than 17 million units. However, the market is expected to level off for 2001 and 2002 as the economy and vehicle sales slow to a still-strong 16-plus million unit clip.

• Original Equipment Light Truck Tires: While one of the largest growth categories in 1999, this category will experience an 11 percent drop in shipments in 2000 to 7.5 million units due to a maturing market in Sport Utility Vehicle (SUV) sales. Domestic tire unit demand will plateau at this level in 2001 and 2002 as any growth in SUV sales will be met by imports.

• Original Equipment Medium/Wide-Base Truck Tires: Shipments will decrease by nearly 15.7 percent or 1.1 million units in 2000 as commercial truck vehicle sales slow dramatically through 2001. However, this category will experience growth in 2002 at which point shipments will rise to the 5.7 million unit level.

• Replacement Passenger Tires: Shipments are expected to leap by nearly 11 million units to reach the 203 million mark in 2000, or 5.8 percent over 1999’s record 191.9 million units. Almost half of this increase can be attributed to the P-Metric P235/75R15 tire recall effort that began in mid-August 2000 and is scheduled to be completed by the end of this year. While the recall bolstered shipments in 2000, it will essentially have “borrowed” from shipments in 2001 and 2002, as many tires that would have normally been replaced in those years will be replaced in 2000. As a result, replacement passenger shipments in total for 2001 are anticipated to decrease by about 2 percent and then pick up again in 2002 to the 203 million unit mark. In reviewing the P-Metric Light Truck tires segment (a subset of passenger replacement tires with light truck appearance and tread characteristics usually found on SUVs and the focus of the recall campaign) on its own, estimates are that shipments will jump by more than 50 percent from 1999’s levels to the 27.5 million mark. Aside from the recall campaign, this segment is one of the fastest growing tire categories due to the SUV and Light Truck popularity over the past decade, and while retreating by 20 percent in 2001, will find its natural level of 24 million units in 2002.

• Replacement Light Truck Tire shipments: Tires with an “LT” designation will experience a strong 3.6 percent growth for 2000--reaching 35 million units. This will continue over the next several years as the proportion of SUVs and Light Trucks in use will increase relative to passenger vehicles on the road. For the category, it is anticipated that 38.6 million units or a 5 percent annualized growth rate will be realized in 2002 compared to 2000 levels.

• Replacement Medium/Wide-Base Truck Tire shipments: While setting a record in 1999 with 14.6 million units shipped, these will continue to grow steadily at a rate of 4.7 percent in 2000 and 2 percent thereafter through 2002. In 2000, the number of units shipped will increase by about 700,000 and 300,000 for each year thereafter through 2002.

Overall, the combined auto and truck tire shipments for 2000 are projected to exceed 328 million units, up 3.7 percent from the record 316.6 million units in 1999, eventually reaching nearly 332 million units at the end of 2002--a net 15 million unit gain over the forecasted three-year period. Other tire markets with projected higher-than-average industry growth rates for the 2000-2002 will be the “H/V/Z” speed-rated and the performance-rated passenger replacement tires growing at a forecasted 8.7 percent and 3.7 percent annual rate, respectively.

Founded in 1915, the Rubber Manufacturers Association is the national trade association of the rubber industry. Its membership includes more than 100 member companies and affiliated organizations that produce rubber or rubber-related products.

The TMAC is comprised of tire market analyst professionals representing the major U.S. tire manufacturers, which account for more than 90 percent of all U.S. tire shipments. Their analyses and forecasts of current and future industry activity include a review of RMA tire industry and economic data, government trade figures, and vehicle sales and production. TMAC develops its consensus view for tire demand from this process.

For more information, contact www.rma.org.