Low-cost imported tires, retread demand, and the increasing presence of truckstop chains into the tire market are among the trends seen in the truck tire market in Modern Tire Dealer’s annual survey of commercial tire dealers. (MTD is a sister publication to HDT.)
Retreading Gaining Ground
“We feel the quality of our Bandag brand retreads is such that we can compete with a low-cost Chinese tire,” says Pete Glesing, president of commercial sales and operations for Best-One Tire and Service. “It feels like we are making some headway there. Request for Chinese product, while still there, has lessened throughout the year.”
Best-One Tire and Service does quite a bit of business with the nation’s top 50 fleets, which do not buy the Tier 4 products, according to Glesing. “They are regimented to a retread program because they know ultimately that’s the best way to drive out costs from that line item.”
But private fleets, trailer leasing companies and some owner operators demand low-cost Chinese tires. “We’re trying to do some things that are starting to move the needle to where we are purchasing and selling less Chinese product and producing and selling more cap and casings,” says Glesing.
Bob Majewski is also seeing perceptions tilt toward retreads. “We are proving to people how much better the retread is over the low-cost tires, but this takes time,” says Majewski, who is chief technical officer for Lebanon, Tennessee-based Sumerel Tire Service Inc.
Dealers saw volumes of low-cost imported tires rise following the U.S. International Trade Commission’s surprise decision to not levy duties on Chinese truck and bus tires.
“We thought the tariffs were going to go into place,” says David Mickelson. He is president and CEO of Graham Tire Co.’s South Dakota and Nebraska locations. “Like most tire companies, we had made arrangements with our manufacturers. We were very surprised when the tariffs didn’t go through, and it certainly caused an impact in the marketplace with an influx of import tires.”
Mickelson says that while Graham Tire offers Chinese products, his employees focus on selling the benefits of retreading and the value of a new tire that can be recapped multiple times. The message is getting through as his retreading business has seen some improvement in the last six months. “It’s still tough but you have fleets that understand the value of retreading. And they are not always just looking at price.”
Beasley Tire Service Inc. began producing its first retreads a year ago at a leased facility in Hungerford, Texas. “As long as you can fill your shop with tires from fleets that are retreading their own tires, you do OK,” says President Bob Beasley.
His company just completed building a larger retread plant next to its corporate headquarters in Houston.
“We were a large Michelin associate retread dealer for many years until we finally opened our own shop,” says Beasley. The new plant is set to begin producing 250 medium truck tire retreads a day this month. The capacity is 350 retreads per day with the potential for 450.
Beasley Tire’s commercial offerings include emergency road service, fleet programs, truck alignment, front end repair and a mobile offering called “Rolling Tire Shop” that mounts and balances tires on light fleet vehicles on site. The company also sells and services industrial tires.
At McCarthy Tire Service Inc., production of medium truck tire retreads is up. The compay expanded one of its nine retread plants in September 2016. At full capacity, the revamped plant in Wilkes-Barre, Pennsylvania, produces 1,000 Bandag retreads per day.
“The major manufacturers, such as Bridgestone, Continental and Yokohama, make a superior product compared to what you can get in the third and fourth tier that’s manufactured in China,” says John McCarthy Jr., president. “In our opinion, the best way for fleets to run a very good tire program is to start with a new, quality product, wear it out, and then retread that quality casing multiple times.”
Truck Stop Tire Business
Although demand for retreads is picking up, dealers are facing more competition from truck stop chains. Travel Centers of America LLC launched its TA Truck Service Commercial Tire Network, which serves the trucking industry through 244 truck stops, in November 2016. Love’s Travel Stops & Country Stores Inc. is buying Bridgestone Americas Inc.’s Speedco business. The acquisition will add 52 trucking service and lube outlets and bring Love’s network to 323 facilities.
“Truck stops have been in the commercial tire business forever,” says McCarthy. “They have a renewed focus on the commercial tire business.” Up to now, the company’s competitors have been the same size or smaller. “We’re now competing against someone who is much, much larger than us. We are going to continue to offer tires, road service and mechanical services at our locations and just be the very best servicing provider that we can be,” says McCarthy.
Best-One’s Glesing notes that truck stops are more business-to-business now rather than simply retail outlets for buying gas, food, and tires. “Truck stops are actively pursuing fleets at their locations,” he says.
Best-One is emphasizing its focus on tires and service for trucks and truck tires to customers. “It’s our core business and we are expert at it,” says Glesing. “There haven’t been a lot of wins from the truck stops but they’ve certainly been disruptors in going out and saying here’s what we have to offer, come and do business with us.”
Truck stop chains are providing fuel rebates and immediate reimbursement to fleets for reaching certain levels on tires, retreads and fuel in their networks. Tire buying programs that tie into fuel purchases are having an impact on commercial dealers industry-wide, according to Glesing.
Lindsey Beer, chief strategic officer and a third-generation member of the Zurcher family that founded Best-One in 1948, says the ability of truck stop chains to offer multiple services and products appeals to truck operators.
“Where we are focused on our service, our flexibility and our expertise, the one thing the truck stops bring to the table is the one-stop shop. We’re not going to get into the oil business or the convenient mart business; it’s just a way we’re different. Both of us bring advantages to the table.”
Outlook is Optimistic
Despite the marketplace challenges, commercial tire dealers added stores, services and equipment in the last 12 months. Investment in buildings, equipment and people suggests dealers are optimistic about the future of the commercial market and their own businesses.
For instance, in the last 12 months, Best-One Tire and Service opened a retread plant and commercial outlet in Great Bend, Kansas, as well as a commercial store in New Haven, Indiana.
Says Glesing, “I think the remainder of the year will be strong, and I think 2018 will be strong commercially. I think asset utilization will hover around 90%, I think tonnage will be up, and I’m hoping freight rates will also match the increase in tonnage.”
McCarthy Tire opened seven locations in 2017, increased capacity in its retread plants and opened an additional retread plant. All business segments are up in sales year to date. The company has added truck mechanical service at a number of its locations, and its mobile mechanical offering is growing as well.
“More fleets are outsourcing trailer repair and mobile trailer repair and mobile tractor maintenance to us because they have trucks domiciled in an area where they don’t have their own maintenance facilities. And,” says McCarthy, “it’s tough to find good people.
“Everybody is looking for mechanics. In a lot of areas we’ve been able to attract good mechanics, and therefore, we have the people to supply the services our customers need.”
McCarthy is bullish on the future. “I feel there’s going to be more consolidation in our industry, meaning the big dealers are probably going to acquire some of the smaller dealers. Granted, we have competition from truck stops and online companies. Even manufacturers such as Continental are growing their own company-owned locations. But we feel that if we deliver great products and give the best service we’ll continue to grow.”