Automotive Fleet, November 2018

sultant for Element Tire spend is the largest component of maintenance operating expenses Overall tire spend in 2018 represents about 18 of all maintenance spend no change from 2017 For light duty vehicles tire spend in 2018 represents about 23 of all maintenance spend again no change from 2017 said John Wuich vice president strategic consulting services for Donlen Traditionally the cost of tires has remained fairly consistent and that trend held true for most of 2018 Now as the year comes to a close were beginning to see slight price increases from a handful of manufacturers While relatively minimal on average about 3 to 4 this is something were monitoring closely and working with our clients to adjust budget forecasts accordingly said Chris Foster manager truck account administration for ARI Replacement Tire Pricing Trends The trajectory for replacement tire prices in the 2018 2019 timeframe is upward due to current commodity pricing Higher commodity pressures exert pressure on tire OEMs to maintain margins as their production costs increase In the end commodity prices dictate replacement tire costs Tire pricing is rising due to higher cost of raw materials and larger catalog of tire sizes Slight increase in tire price has been offset by increased emphasis on both tire strategy and preventive maintenance resulting price management and extended intervals between replacements We are seeing more fleets use analytics to understand where tires are being purchased and at what price Using this data pricing thresholds in some cases may be implemented with tools and technology used to advise fleets on where to purchase Also a year over year jump in scheduled maintenance compliance of about 5 for light duty vehicles has tied into tire strategy by ensuring tires are properly inflated and rotated said Wuich of Donlen More fleets with medium and heavy duty vehicles are leveraging non traditional replacement options such as commercial retread tire programs to reduce costs as much as 40 Additionally more tire manufacturers have developed support teams designed to help fleet customers and FMCs with making targeted tire selections Tier 3 and 4 tires continue to grow in popularity providing a pricing challenge for name brands said Mark Atchley senior supply chain manager for Enterprise Fleet Management One segment being impacted is euro spec tires Were seeing greater tire availability in the euro spec tire space Many of these new tires are priced significantly lower than the OEM tire which for a period of time was the only tire available said Lange of Element However OEMs selling brand name tires are narrowing the price gap Your typical name brand tire costs have become even more competitive to the more unfamiliar brand tires that have been usually a lower cost point said Lange Trend to Larger Tire Diameters Another factor exerting upward pressure on replacement tire costs is the ongoing trend to larger diameter tires and unique tire sizes In addition due to larger tire sizes on vehicles the wheels are more prone to damage from pot holes and other road hazards For several years the industry has been trending toward larger wheel diameters short sidewalls and an increased variety of sizes The combination of larger wheel diameters and shorter sidewalls increases tire prices due to the advanced engineering required for the tire construction The greater variety of sizes has forced distributors and retailers to manage more inventory which drives up their inventory holding costs These costs are passed along to the end user Partnering with a fleet management company can stabilize tire and maintenance costs for fleets through strong industry relationships with service vendors said Kelley Hatlee CAFS national service department technical support supervisor for Enterprise Fleet Management The increase in OEM automobile wheel diameters has driven up the price of fleet replacement tires primarily because the larger the tire the greater the manufacturing expense In addition to the raw materials increases larger vehicle tire diameters continue to impact overall tire pricing which has in turn helped to increase total costs said Albright of Merchants Fleet Management Consumer preference is clearly trending toward larger wheel sizes and automakers are responding to that demand accordingly Standard OEM rim diameters are moving toward the use of 18 inch or 19 inch tires for a wide range of models with several offering 20 inch options for some vehicles And with more models featuring these larger tires naturally the cost to replace those tires increases as well said Foster of ARI During the past decade tire diameters have increased in size to as much as 24 inch 26 inch and even larger However according to Wuich of Donlen a trend noted last year in moving to larger diameter and more costly tires is subsiding 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 in the aftermarket 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 Trim level selection can make a significant impact on tire AUTOMOTIVE FLEET I NOVEMBER 2018 32 SPECIAL REPORT TIRES HATLEE Enterprise Fleet Management ATCHLEY Enterprise Fleet Management WUICH Donlen FOSTER ARI LANGE Element Fleet Management