Economic woes and decreased spending has kept demand low over the past five years
Los Angeles, CA (PRWEB) March 07, 2013
Over the past five years, the Tire Dealers industry suffered primarily due to the economic downturn's effects on consumers and commercial markets. Because the industry has a tendency to operate countercyclically, weakened economic conditions that started in 2008 boosted industry revenue. In this year, consumers chose to visit tire dealers rather than pay for car dealership services (which are generally preferred). However, as the recession worsened in 2009, all markets put off purchasing tires. With recovery in 2010 and 2011, including improved disposable income and lower unemployment, consumers once again flocked to car dealerships for their tires and tire-related services. Additionally, fewer replacement tires were needed as new vehicle sales increased, which hurt industry revenue. The industry faces high competition, primarily from car dealerships, but also from consumers switching modes of transportation. Although car dealership services are more costly, consumers choose to service their vehicles at these establishments. Also, repairs may be under warranty, justifying a visit to a car dealership rather than a tire dealer. On the other hand, when consumers take alternate modes of transportation, demand for tire dealers diminishes. “For example, when fuel prices increase, consumers generally avoid driving their vehicles to use cheaper alternatives like public transportation,” says IBISWorld industry analyst Lauren Setar. With less car use, wear and tear will not be as great and consumers will require tires less often. As a result, over the five years to 2013, industry revenue has fallen at an average annual rate of 0.2% to $3.7 billion, including 2.7% growth in 2013.
In the next five years, the industry is anticipated to fare better due to greater demand from commercial markets. Although unemployment is expected to fall and consumer disposable income is estimated to grow, generally decreasing industry demand, these improvements will help the industry's commercial market. With these trends, consumers will purchase more goods, requiring more transportation. As a result, more tires will be needed to accommodate the rise in sales and greater use of trucks. However, a decrease in the consumer market will hamper revenue growth. According to Setar, as consumer disposable income grows, consumers will likely go to dealerships for tires and will be able to purchase new vehicles, which decreases the vehicle fleet's average age.
The Tire Dealers industry in Canada is highly concentrated. The industry landscape is dominated by one company, which will account for more than two-thirds of industry revenue in 2013. Because one firm has dominated this industry over the past five years, the industry's market share concentration level has remained relatively unchanged since 2008. Additionally, IBISWorld expects Canada Tire to continue to account for a large majority of industry revenue over the next five years, with significant potential for added growth. Given the company's size and scope, Canada Tire can leverage its dominance to acquire smaller players or to expand with new establishments over the next five years. For more information, visit IBISWorld’s Tire Dealers in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry retails tires and tire tubes for passenger cars, sport-utility vehicles (SUVs) and commercial trucks. Businesses that offer maintenance services in addition to tire sales are included in this industry; however, car dealership tire services and online tire sellers are excluded.
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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