Yokohama talks tire price increases, labeling

Price increases, raw material shortages and supply problems all challenges for tire industry

Published: February 27, 2012, 5:00 PM

Yokohama Tires

In an analysis of the consumer tire market, Dan King, Yokohama’s senior vice president of sales and marketing says price increases, raw material shortages and supply problems were major issues for the industry in 2011.

But he predicts the industry will be better than it was in 2010 or 2011, and post very moderate growth for both original equipment and replacement tires.

"Raw material will be something we have to watch closely because costs increased dramatically at the beginning of 2011. We’re seeing some tapering off now, but many economists are nervous about where raw material costs are heading. A lot depends on the supply situation and concerns with the rubber plants. Issues in China, such as their own increasing demand for cars – and thus tires – can have a dramatic impact on the demand for raw materials, the 24-year tire industry veteran says.

Addressing the issue of multiple price increases by tire manufacturers last year King says raw material costs are only part of the issue. "The other factor, of course, is the global economy and dealing with exchange rates and the importance of the American dollar overseas. When you're a global company, and you're looking at how the yen is valued vs. the euro, or the yen is valued vs. the dollar, there are issues we have to take into account," he said.

Asked about issue the industry faces going forward, King singled out pending NHTSA and California legislation related to fuel efficiency grading and labelling.

NHTSA has been delaying their final ruling on the Tire Fuel Efficiency Consumer Information Program in the U.S. "We’ve had discussions with them regarding legislations as well as with the RMA, being an active member and on the board of that organization. We’ve been successful getting NHTSA to step back and make sure they feel it is the right direction. While it’s on hold, it could be implemented this year and become a major issue in 2013-14.

"We’re not against labeling – we like that idea. We want to educate the consumer as much as possible. It is how NHTSA is focusing on certain aspects of the tire that we think could be confusing to the consumer, whom we’d like to understand more about tires."

California still has legislation on the books about a different fuel-efficiency grading system. If California proceeds with legislation that is different than NHTSA it "would create a huge dilemma for our industry.

On the product front King sees run-flat tires as the next growth area.

"Runflat tires were once perceived as a quickly passing trend, but in 2011 more than 400,000 new vehicles in the USA and Canada came with runflat tires. That number is expected to grow to almost 700,000 by 2015.

Another trend is higher speed ratings in the all-season touring market. Since 2007, V speed ratings and above have increased approximately 50% in all-season touring tires.