Financial pressures and shrivelling disposable incomes will impact tire sales in 2024.
Tough times call for tough decisions. Today’s high interest rates and rising prices are putting pressure on consumers as they ponder how to best spend their money. Dwindling household budgets will no doubt have an impact on passenger tire sales in 2024, as consumers consider their options and look at alternatives.
“Tire demand was pretty weak in the second half of 2023,” says Sterling Arndt, COO of OK Tire. “We expect it to stay the same, or to uptick at the beginning of 2024.”
An interesting trend, according to Arndt, is that consumers are willing to make sacrifices when purchasing new tires. “With the economy the way it is, I see the consumer probably moving a tier down in their decisions,” he adds. “There’s still some strong tier one [demand], but there are a lot of tier two [customers] who are moving to a tier three or tier four product now, based on their financial position.”
This trend could be good for tire retailers who already offer quality value-tier tires, Arndt explains. “Our Sailun Blackhawk brand is probably going to be our biggest seller in 2024,” he adds. “We also see a lot of Bridgestone and Michelin customers moving into Toyo.”
Financing
In order to make a tire purchase more manageable for their customers, OK Tire offers financing, which allows consumers to pay off their tire purchase over a number of months, rather than in one large sum. Arndt says he’s seen an increase in the number of customers taking advantage of financing options.
“It’s more popular with those who are purchasing lower-tier tires,” he adds. “Tier one customers, for example, almost never finance, because they’re generally better off to begin with. I would says that it’s more the tier three customer, maybe driving an older vehicle that probably needs some mechanical work, who will take advantage of financing options.”
Dwayne Sawyer, National Sales Manager, PLT, Sailun Tire Americas agrees. “I think there’s a definite shift to the value segment, because disposable income simply isn’t there for a lot of consumers,” he says. “We’re in a good position because of the value proposition we offer, but some of the other brands out there will see a decline from their top level brand to their secondary brand.”
Not only are consumers looking for lower-priced tires, but they also want long-term benefits from their tires. “People are looking for fuel efficiency,” explains Jack McLure, PLT Segment Manager, Sailun Tire Americas. “We see some of the manufacturers advertising lower rolling resistance, and that’s something we really didn’t talk about that much in the past. Electric vehicle owners are part of this conversation, but people are now finding that lower rolling resistance benefits regular vehicles too, so they want to take advantage of it, if they can.”
Transactions vs. volume
When it comes to forecasting passenger tire sales trends for 2024, Ernest Bedia, President and CEO at Pirelli Tire offers a different perspective. “We’re going to see an upward trend,” he says. “You can’t necessarily look at it from just a unit volume perspective. You have to look at overall transactional value, and we see that trend continue to grow through the spring.”
Bedia explains why he believes that transactional values are going to increase in 2024. “There’s definitely going to be a continued trend towards higher rim size fitments, and higher mixed fitments, because these are the vehicles that have been selling for the past two to three years. These are the higher trim level fitment vehicles, so naturally, you’re going see an increase in the number of higher rim sizes going through the market, which is obviously going to benefit the retail side with higher overall transactional prices.”
Know your customer
In order to prepare for the coming changeover season, Bedia says that it’s important for tire retailers to understand their clientele. “It’s important to know your local car park,” he explains. “This is going to be even more important as we see more electric vehicles on our roads. You might have the right size tires for these customers, but they may be shopping specifically for an EV tire for their electric vehicle.”
Today’s consumers, Bedia argues, expect more from their tires, and many have done their homework, which means they know what they are looking for long before they step into your tire showroom. This is especially true of EV owners, who realize that their vehicles are different, and who demand a lot from their tires.
That’s why tire manufactures are working hard to keep up with consumer demand. “We have a lot of innovations that are currently in the works right now,” Bedia says. “We understand North American tire requirements, and tire technologies will continue to adapt and evolve to keep up with the demands of newer vehicles, and with consumer expectations.”
While the economic reality may not be the best, Sailun’s Dwayne Sawyer notes that life is getting back to some kind of normal now, which means that tire sales are bound to pick up in 2024, simply because people are using their vehicles more often than they did during the past few years.
“People are travelling more,” Sawyer adds. “They’re coming back into the office more often than they did during, or just after the pandemic, which means they’re going to put more miles on their vehicles in 2024.”
In other words, economic pressures notwithstanding, people still need to drive and they still need tires. That’s good news for retailers eager to fill the demand.
