Offshoring will hamper industry growth, though demand for tires will rise.
Los Angeles, CA (PRWEB) May 20, 2013
The Tire Manufacturing industry is rolling its way on to recovery. According to IBISWorld industry analyst Antonio Danova, “Exports to the US market generally dictate the pace of the industry, and the market has been flourishing as of late.” Industry revenue grew substantially in 2010 and 2011 as pent-up demand for tires from the recession resulted in sales growth during the economic recovery. Additionally, 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 $2.5 billion during 2013. 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. IBISWorld estimates that these lingering effects have still brought industry revenue down at an average annual rate of 3.1% over the five years to 2013.
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 past five years, hitting highs right before the recession and gaining substantial ground during the economic recovery,” says Danova. As such, 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 labour abroad and accessing growing markets in emerging countries.
The Tire Manufacturing industry carries a moderate to high level of market share concentration, with the top major company, Michelin, producing an estimated 67.4% of industry revenue in 2013. Tire manufacturers produce tires for all types of vehicles, and the concentration among various market segments is quite similar. The expected market concentration of the overall industry has not changed much over the past five years, so established players have invested significantly in research and development to gain market share.
Industry performance will continue to improve over the next five years as consumer incomes rise and the economy gradually continues to improve. 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, offshoring will continue as firms widen profit margins by moving facilities to countries with cheaper labour 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.
For more information, visit IBISWorld’s Tire Manufacturing in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry is primarily engaged in manufacturing tires and inner tubes from natural and synthetic rubber. The finished products are then sold to 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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