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Although prices for replacement tires increased 3% per unit per month in calendar-year 2019 compared to CY-2018, the per transaction tire costs were up less than 1% for fleets buying at pre-negotiated national account prices.
Most of the subject matter experts that we spoke to expect an increase in tire prices, although predicting future tire costs is difficult due to variables that influence tire pricing.
Replacement tire prices are driven by raw material costs, which in CY-2019 were less volatile, but higher nonetheless. Tire prices increased slightly higher than the rate of inflation, which was partially offset by improvements in tread wear longevity.
Toyo Tire U.S.A. will increase the price of almost all of its commercial tires on May 1 with just one exception.
Upward cost pressures on replacement tires have emerged in 2018, due to higher cost for the commodities used to manufacture tires and the trend to larger diameter 17- to 18-inch wheels, which are more expensive to replace.
Bridgestone Americas Tire Operations LLC and Bridgestone Canada Inc. will increase the price of Firestone brand truck and bus radial tires on Feb. 1, 2019.
Michelin North America Inc. will increase prices on its commercial tires on Dec. 1 by as much as 8%.
Higher commodity prices are putting upward pressure on fleet prices for replacement tires. National accounts are no longer as willing to absorb the majority of price increases, which are between 3%-8% on select tire lines.
A fleet cost reduction program goes straight to the corporate bottom line. If a company operates at a 10% annual net profit margin, reducing annual fleet expenses by $100,000 is the equivalent of generating $1 million in sales. Although fleet managers manage hundreds of thousands to tens of millions of dollars in corporate assets, only half are incentivized to achieve targeted performance goals. I advocate incentivization should be a universal best practice extended to all fleet managers.
For the past four years, tire costs have been stable. But, new cost pressures have emerged in 2017, due to higher prices for the commodities used to manufacture tires and the trend to larger diameter, more expensive tires.