Offshoring will hamper industry growth, though demand for tires will rise.
New York, NY (PRWEB) June 09, 2014
The Tire Manufacturing industry is rolling its way on to recovery. Exports to the US market generally dictate the pace of the industry, and the market has been trending higher 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,” according to IBISWorld Industry Analyst Brandon Ruiz. Additionally, because new tires can improve gas mileage, rising gasoline prices pushed 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 1.5% in 2014. 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. Despite volatility from the economic downturn, IBISWorld expects industry revenue to grow at an annualized rate of 1.7% to $2.3 billion over the five years to 2014.
On top of a slump in demand from consumers during the recession, industry operators have also dealt with input price pressures. “The world price of 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 Ruiz. As a result, 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 more affordable labour abroad and accessing growing markets in emerging countries.
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 a result, 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 more affordable labour and proximity to key markets, a trend that may ultimately subdue growth potential.
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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