Inflation in US tire market should end

If anything, the first quarter of 2023 was a deflationary period for wholesale tire prices.?As the supply chain stress and costs eased, prices for imported tires and raw materials for building them rapidly declined.? Most of our distributors have sold through their high-cost stock which arrived in the first half of 2022.? At a wholesale level, prices have reverted to a lower and what seems to be stable level.

What is missing now is for the consumer to reap the benefits of these lower prices.?The broad retail price tracking we follow shows that sell-out prices at retail have hardly moved over the last 12 months.?The below chart is courtesy of Fitment Group.

In Atturo’s own price tracking, we are still seeing our tires sold for an average of 12% above our MSRP.?This has only edged down slightly over the first part of 2023.? There is a definite lag and growing gap between wholesale tire prices and retail. It has always been an intentional goal for Atturo to manage our brand to maximize the profitability for distributors and dealers, while maintaining good value to the consumer.?So, I never begrudge anyone their margin!?However, as this gap persists, it is an opportunity for the well positioned retail dealer to grab some volume while still achieving strong margins.?

Recent industry data shows continued stagnant year over year volume at retail. Surely the opportunity is here for retail tire prices to move down and increase volume.?Retail tire dealers are burdened with higher labor and other costs, necessitating a higher overall margin.?But, they still need car count and tire sales to cover basic costs. Those dealers who are working with a distributor and brands which have already brought down their wholesale tire prices should be well positioned to begin reducing sell out prices while holding onto necessary margins.?

Miles driven continue to increase.?Vehicle age is the highest ever in the US. The demand is out there. I believe all that is needed to stimulate retail sell through is to pass along the wholesale price reductions to the consumer.??This is a rare opportunity to increase volume while maintaining margin simply by adjusting your product screen to the right brands.

I'm curious to hear what the retail operators are experiencing. Can unit volume rebound in the second half of the year?