The industry will produce more fuel-efficient tires, supporting revenue growth.
Los Angeles, CA (PRWEB) October 23, 2013
The Tire Manufacturing industry is rolling 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 picked up. Additionally, because new tires can improve gas mileage, rising gasoline prices increased 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 2.0% to $22.9 billion during 2013. These recent gains bode well for the Tire Manufacturing industry in the long run; however, they also mask the significant volatility that the industry endured as a result of the recession. Nonetheless, IBISWorld estimates that industry revenue has grown at an average annual rate of 5.2% over the five years to 2013.
According to IBISWorld Industry Analyst Brandon Ruiz, “In addition to a slump in demand from consumers during the recession, industry operators have also dealt with input price pressures.” The prices of rubber and synthetic rubber have mirrored other commodity prices over the past five years, hitting highs right before the recession and gaining substantial ground during the economic recovery. As such, industry players have increased tire prices to sustain profit margins. The input price volatility has also led to plant closures and offshoring as firms search for ways to save money, including utilizing cheaper labor abroad and accessing growing markets in emerging countries.
“Industry performance will continue to improve over the next five years as the US economy gains strength and consumer incomes rise,” says Ruiz. In turn, people will get behind the wheel at increasing 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 offshoring will continue as firms attempt to widen profit margins by moving facilities to countries with cheaper labor and proximity to key markets, a trend that may ultimately subdue growth potential. Nonetheless, revenue is set to grow in the five years to 2018.
The Tire Manufacturing industry carries a high level of market share concentration. Tire manufacturers produce tires for all types of vehicles, and the concentration among various market segments is quite similar. The expected market concentration of these players has not changed much over the past five years, so established players have invested significantly in research and development to gain market share.
For more information, visit IBISWorld’s Tire Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
The Tire Manufacturing 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
About IBISWorld Inc.
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