Fleet Car Maintenance Costs Increase 7 Percent in 2012-CY
Although costs have increased, many fleets continued to cycle vehicles early to take advantage of still favorable resale market conditions. This strategy has reduced average vehicle age and helped minimize maintenance expenses.
Tire Expenses are Up 15%
The annual GE maintenance survey revealed that the average replacement tire cost per month rose 15 percent, and on a cost-per-mile basis, rose 10 percent in 2012 compared to 2011. “Higher raw-material manufacturing costs drove up the average cost per passenger tire by 8 percent,” Christensen said.
This observation was substantiated by Goodyear. “Many raw materials have been at record-high cost levels, which have impacted manufacturing costs,” added Fred Cooper, national fleet manager for Goodyear Tire & Rubber Company.
While the industry forecast is for passenger tire costs to remain stable for 2013, Strom cautioned that unpredictable raw material costs will continue to be a critical factor in determining future costs.
Art Anderson, national fleet manager for Michelin, echoed this caution about attempting to predict future prices for replacement tires. “We must always remain alert to changing market conditions, as it is impossible to predict the factors that affect tire cost, such as raw materials. However, we do know the surge in raw material costs that occurred during 2011 have abated somewhat, allowing tire prices to be much more stable in 2012. We see this trend in raw material prices continuing into early 2013,” Anderson said.
In 2013, tire composition is expected to include a mix of synthetic and natural rubber. “Natural rubber and synthetic rubbers serve distinctly different functions in the design of a passenger tire,” said Anderson. “Michelin uses both types of rubber in tire design, based on the characteristics delivered by each type.”
While replacement tire costs have been rising, the lifting of the Chinese Tire Tax Tariff could potentially increase the volume of lower prices third-tier manufacturer tire products coming to the U.S. Chart courtesy GE Capital Fleet Services.
Bill Waltzek, national account executive for Firestone, added: “Natural rubber cost indexed at its highest level in the first quarter of 2010. While recent rubber costs have receded in 2012, they remain at historically high levels. The current 2012 rubber-cost trend has relaxed some of the pressures that would drive increased tire pricing into 2013.”
In addition to raw material costs, another factor affecting the tire prices is the lower profile/larger rim diameter tires, which require more material to manufacture, according to Waltzek.
The industry-wide trend to larger diameter OEM tire sizes is a key factor that has driven up tire prices in the past decade. “The increase in OEM automobile wheel diameters has driven up a fleet’s costs for replacement tires,” said Strom.
According to Michelin’s Anderson, the 14- to 15-inch diameters represented 35 percent of the tires in 2002 and 10 years later, the 17- to 18-inch wheel diameters represent almost 60 percent. Anderson added, “Through our work with original equipment manufacturers (OEMs), we see the trend of higher wheel diameters staying in place for passenger cars in the foreseeable future. Car manufacturers continue to evolve technologies to improve the handling characteristics, driving experience, and fuel efficiency offered by their vehicles and tires have been a major lever in this process.”
Another factor driving up the price of replacement tires is the limited availability in the retail market.
“Fleets have also experienced challenges with new tire sizes introduced by a car manufacturer and limited same tire size replacement aftermarket availability,” said Strom.
Likewise, Anderson commented on this same challenge. “Tire size is one of the choices vehicle manufacturers make to create the handling and performance characteristics they want in a vehicle. Often, this leads them to equip vehicles with a totally new tire size that has no current presence in the market. Typically, in this case the OEM will have the only available tire for the replacement market. As a vehicle ages and the tire replacement market demand grows, other tire manufacturers will typically add these sizes to their own lines. It can take up to three years for an adequate replacement market to emerge. This type of situation will likely continue in the future, as vehicle manufacturers strive to offer technologically advanced vehicles that require new tire specifications to achieve their optimum performance.”
Charts 7 and 8 depict average repair costs per unit and per mile. Repair costs include unscheduled services, such as brakes, suspension, engine, transmission, electrical, and other service. There have been lower repair costs since 2010 as slight price increases have been offset by additional vehicle replacement cycling. Chart courtesy GE Capital Fleet Services.
Also, the National Highway Traffic Safety Administration (NHTSA) published a final rule in 2010 specifying the test methods to be used for a new tire fuel-efficiency consumer information program (TFECIP). “As a result, tire manufacturers are innovating in the areas of reduced rolling resistance, lowered weight, and the use of more sustainable products and processes designed to increase fuel economy for vehicles to meet increasing demands,” Waltzek said.
One factor that could put downward pressure on future tire prices revolves around the Chinese Tire Tax Tariff, which was lifted last year. “Although we saw reduced tire store inventories for lower-priced, house brand tires in 2012, this could change in 2013 if the Chinese Tire Tax Tariff remains lifted,” Strom said.
Waltzek of Firestone agreed. “The lifting of the Chinese Tire Tax Tariff could potentially increase third-tier manufacturer tire products coming to the U.S.,” he said.
One silver lining is that new tire technology is offsetting increased tire costs by extending tread life and helping to reduce other operating costs, namely fuel consumption. “Tire manufacturing innovation is addressing fuel savings with low-rolling assistance traction in snow, rain, and other features,” Strom said.
According to Cooper, Goodyear is developing “air maintenance technology” that will help ensure that the optimum tire pressure is maintained and, as a result, could mean substantial savings at the fuel pump.
Cooper also added several additional recommendations on how tire selection can be used to optimize overall fuel economy. “For fleets interested in fuel efficiency as it relates to tires, they should first look at how tires are designed for specific purposes. Tire development has traditionally involved working within a ‘performance triangle’ that includes traction, tread wear, and rolling resistance. Improving a performance attribute within one area of the triangle can affect performance in another area,” he said. “For fleets who focus on ‘purchase price only’ when choosing tires, they need to remember the importance of total performance, whether that means fuel efficiency, expected tread mileage, and grip and traction in challenging weather conditions.”