The industry will produce more fuel-efficient tires, supporting revenue growth.
New York, NY (PRWEB) February 24, 2014
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,” according to IBISWorld Industry Analyst Brandon Ruiz. 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 1.3% to $23.2 billion during 2014. These recent gains bode well for the industry in the long run; however, they also mask the significant volatility that the industry endured as a result of the recession. Nonetheless, IBISWorld expects industry revenue to grow at an annualized rate of 7.6% over the five years to 2014.
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 a result, industry players have increased tire prices to sustain profit margins,” says Ruiz. The input price volatility has also led to plant closures and offshoring as firms search for ways to save money, including utilizing low-cost 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. 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. Therefore, 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 more affordable labor and proximity to key markets, a trend that may ultimately subdue growth potential.
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
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