In March, Goodyear, Bridgestone-Firestone, Continental, and Yokohama, announced they will increase the prices of replacement tires by 4-7 percent. The reason for the price hike is the ongoing increases in the cost of raw materials and manufacturing and transportation costs to move product to tire dealers. The Goodyear price increases were effective April 1, while the price increases for Bridgestone-Firestone, Continental, and Yokohama are effective May 1. These were the latest in an earlier series of multiple tire price hikes that occurred in CY 2006.
Compared to 2005, the price of replacement tires for passenger cars increased an average of 4-6 percent in 2006, representing an additional cost of $4 to $5 per tire. As a result, more and more fleets are closely managing the cost of replacement tires. For instance, use of off-brand replacement tires has grown. This decision has been driven mostly by cost considerations. Increasingly, more fleets are gravitating to fleet policies that mandate drivers to purchase the lowest-cost replacement tire.
Although the primary reason for the tire price increases is related to the cost of oil, another factor influencing replacement tire prices is the trend by manufacturers to design vehicles with larger wheel sizes. Only a few years ago, 15- and 16-inch wheels were the norm for passenger cars. Currently, these same-sized cars are now equipped with 16- and 17-inch sizes, and some even have 18-inch wheels. Not long ago, 17-inch-diameter wheels were limited to high-end sports cars. Now, some minivans and pickups come standard with 17-inch tires. The larger the tire, the more it costs to replace, and depending on a fleet’s vehicle mix, this could substantially increase a fleet’s total tire replacement expenses.
Tire Expense is Controllable
Replacement tires are a fleet’s third-largest expense, following depreciation and fuel. Tire expense can be controlled not only by buying a house brand or value tire, but also by selecting vehicle models that have “standard size” wheels. As a consequence, fleet managers are paying closer attention to tire size. In fact, several fleets have recently decided not to allow driver-paid options that upgrade the tire size because they increase the cost of replacement tires.
With one popular mid-size sedan, when the driver is allowed to upgrade to the high-performance model, the tire size increases to 18 inches. Although the cost differential to upgrade to the high-performance model is paid by the driver, a hidden cost is now borne by the fleet to pay for the larger, more expensive replacement tire. In this particular example, the larger replacement tires, with a higher speed rating, cost 33 percent more.
In addition, drivers who gravitate to high performance models often turn off the traction control switch. In the off position, these would-be “boy racers” can engage in tire-screeching, rubber-burning accelerations. Fleet managers of these vehicles are left scratching their heads, wondering why tires wear out prematurely, oblivious to this abuse.
Another restriction with driver-paid options occurs with truck packages. For example, one popular fleet pickup is factory-equipped with 17-inch tires, but an attractively priced upgrade package increases the tire size to 20 inches. These tires cost twice as much to replace.
No-Tire-Rotation Policy
Several large utility/service fleets are experimenting with a no-tire-rotation policy as one component of a multi-prong initiative to reduce overall tire expense. These utility/service fleets are comprised of minivans and light-duty trucks that average 12,000- 15,000 miles per year.
One factor prompting the no-tire-rotation policy has been the introduction of tire pressure monitoring systems. Some vendors charge to reset the system when tires are rotated, typically $15, sometimes more. Some fleets are foregoing tire rotations to eliminate these costs. The exception is if feathering or cupping occurs, then the fleet allows rotating tires to extend their tread life. However, these fleets, as a matter of policy, will not rotate tires proactively at set mileage intervals.
It will be interesting to see how overall operating costs are affected year-over-year by a no-tire-rotation policy. Although this policy may violate conventional wisdom and be perceived as penny-wise, pound-foolish, they cite real-world examples to justify a no-tire-rotation policy. For instance, some current models are equipped with different size front and rear tires, making rotation impossible; however, tread life does not appear to be adversely shortened.
Nonetheless, the majority of fleets recommend rotating tires at set intervals, typically every other oil change. If a tire is kept in one position too long, irregular wear patterns develop. When you think about it, factory-equipped OE tires are the cheapest tires you will buy because they come with the new vehicle. Fleet policy should be to maximize the tread life of OE tires, and one way to do so is by regularly rotating tires.
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