Automotive Fleet, March 2018

Inventory Challenges When ordering vehicles with unique tire sizes many fleet drivers are surprised that they are unable to locate a replacement tire due to inventory constraints Unique tire sizes and specs on certain vehicles pose a challenge to fleet managers when a replacement tire is needed because there is often limited availability The availability of a replacement tire depends on many factors volume production costs type of vehicle and whether the tire will be profitable Therefore in some cases there could be only one tire manufacturer with a replacement tire that is suitable for that vehicle Not only is there limited availability of unique tire sizes for individual vehicle models but there may also be a limited number of store outlets that stock them Another factor proven to exert upward pressure on replacement tire costs is the ongoing trend to larger diameter tires and unique tire sizes As auto manufacturers develop unique tire sizes for new model vehicles it impacts the replacement tire supplies for one to two years as other aftermarket tire companies may not immediately meet the demand for these tire sizes This lag time limits the selection and availability of replacement tires Forecast of 2018 Tire Costs Predicting future tire costs is very difficult due to the many variables that influence tire pricing The unpredictable cost variable for tire prices is the price of commodities such as oil rubber and steel which are three key ingredients needed to manufacture tires Tire costs are driven by raw materials cost If raw material prices stay consistent tire prices stay consistent The cost of raw materials influences most of the fluctuation in tire prices On average raw material prices were up 5 to 10 in 2017 and the forecast is for a continuation of current prices into calendaryear 2018 But this forecast based on past experience can change quickly given the volatile nature of the commodity markets It is anticipated that replacement tire prices on light vehicles will continue to increase in 2018 to compensate for higher raw material costs The magnitude of the price changes will be determined by the sustained strength of commodity prices Tire Manufacturing Innovations One factor exerting downward pressure on fleet tire expenditures is the ongoing improvement in tire quality which has resulted in longer wear life during the past decade Tire tread life has been extended by 10 in the past 10 years This has helped offset some of the recent price increases since the expense is spread out over a longer period There are a number of manufacturing innovations being explored and implemented by tire OEMs to reduce costs and extend wear life One approach has been to research the use of alternate materials and commodities to manufacture tires AF AUTOMOTIVE FLEET I MARCH 2018 30 5038 5212 5371 Cost Per PM PM AND TIRE COST 2015 2016 2017 11367 11026 13078 Average Cost Per Tire 2015 2016 2017 0 30 60 90 120 150 31 38 40 Average Months between PMs AVERAGE MONTHS AND MILES BETWEEN PMS 2015 2016 2017 00 05 10 15 20 25 30 35 40 Average 0 1 2 3 4 5 6 7 8 1320 1298 1345 Cost Per Unit Per Month TIRE SPEND 2015 2016 2017 0 3 6 9 12 15 0006 0006 0007 Cost Per Mile 2015 2016 2017 000 0001 0002 0003 0004 0005 0006 0007 0008 Average per tire costs increased in 2017 as more vehicles were replaced with larger diameter tires and snow tires SOURCE ELEMENT Tire spend per unit per month increased 4 as more vehicles were replaced with larger diameter tires and snow tires TIRE SPEND SOURCE ELEMENT REPLACEMENT TIRE COST 2017 U S REPLACEMENT PASSENGER TIRE BRAND SHARES based on 2083 million units BRAND OF TOTAL Goodyear 120 Michelin 95 Bridgestone 75 Firestone 75 Cooper 50 BF Goodrich 45 Hankook 45 Continental 40 Yokohoma 40 Falken 35 General 30 Toyo 30 Kumho 30 Multi Mile 25 Nexen 25 Pirelli 25 Primewell 20 Sumitomo 20 Uniroyal 20 Dunlop 15 GT Radial 15 Hercules 15 Mastercraft 15 Nitto 15 Sailun 15 Big O 10 Cordovan 10 Kelly 10 Mastercraft 10 Sigma 10 Others 55 Because numbers are rounded to the nearest one half percent the total may not equal 100 Brands must have at least 1 of the market in shipment numbers to be listed at 1 CHRISTENSEN Element INCLUDES DATA FROM PASSENGER CARS CROSSOVERS MINIVANS AND COMPACT SUVs