The industry will produce more fuel-efficient tires, supporting revenue growth
Los Angeles, CA (PRWEB) August 21, 2012
The Tire Manufacturing industry is rolling on its way to recovery. Revenue grew substantially in 2010 and 2011 as pent-up demand for tires from the recession resulted in sales growth during the economic recovery. This growth has brought several major players out of negative income territory as demand has picked up. Additionally, according to IBISWorld industry analyst Antonio Danova, "because new tires can improve gas mileage, rising gasoline prices pushed interest in and sales of tires that improve fuel efficiency." As a result, new fuel-efficient tires are flying off the sales racks, and industry revenue is anticipated to increase 2.5% to $19.8 billion during 2012. These recent gains bode well for the industry in the long run; however, they also mask significant volatility the industry endured as a result of the recession. This volatility has inhibited the growth potential of industry revenue over the past five years, keeping it relatively unchanged with a slight 0.1% average annual decline expected over the five years to 2012.
On top of a slump in demand from consumers during the recession, industry operators have also dealt with input price pressures. The price of rubber and synthetic rubber has mirrored other commodity prices over the five years to 2012, hitting highs right before the recession and gaining substantial ground during the economic recovery. "As such," says Danova, "industry players have increased tire prices to sustain profit margins." The input price volatility has also led to plant closures and outsourcing as firms search for ways to save money, including sourcing cheaper labor abroad and accessing growing markets in emerging countries. The Tire Manufacturing industry is highly concentrated in the hands of several major companies – The Goodyear Tire & Rubber Company, Compagnie Generale des Etablissements Michelin, Cooper Tire & Rubber Company and Bridgestone Corporation – that control almost the entire market.
Industry performance will continue to improve over the next five years as the US economy gains strength and consumer incomes rise. In turn, people will get behind the wheel at accelerating rates, facilitating more necessary tire replacement. In addition, tires that help make cars more fuel-efficient will still be popular among budget-conscious consumers, helping drive industry sales. As such, industry players will invest in creating tires that cater to this demand as fuel prices rise and environmental awareness grows. Despite a projected increase in demand for tires over the next five years, industry outsourcing will continue as firms widen profit margins by moving facilities to countries with cheaper labor and proximity to key markets. As a result of these trends, revenue is set to grow in the five years to 2017. For more information, visit IBISWorld’s Tire Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures aircraft and motor vehicle tires, inner tubes and tire repair materials. The finished products are then sold to aircraft and motor vehicle manufacturers and tire wholesalers. Operators within this industry do not retread tires.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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