As the possibility of a trade war with China heats up, commercial vehicle tire retailers note they’ve been long concerned about low-cost Chinese truck tires flooding into North America. Donald B. Rice Tire Co. Inc., which goes to market as Rice Retreading Inc., considers cheap Tier 4 tires its biggest competitive challenge today. “We are constantly looking for ways to cut cost out of the retread process so that we can be competitive,” says Chris Chase, president. Retread sales were flat year-over-year at the Frederick, Md.-based company.
Bill Ziegler, president of Ziegler Tire & Supply Co., says bluntly: “Tier 4 tires are slowly killing the retread business.” Retread sales were flat in 2017 versus 2016 for the Massillon, Ohio, based company. Ziegler says to be more competitive requires an increase in volume to spread costs over more units. “We are trying to sell more retreads and casings versus selling Tier 4 new tires.”
At Wonderland Tire Co. Inc., retreading made up 40% of company-wide sales in 2017. “Our units were up about 4% over 2016 but this was mainly due to two acquisitions that we made in June of 2017,” says Jon Langerak, president.
“Pricing is very competitive in the retreading sector, and we see this trend continuing because of the cheap disposable Chinese truck tires being dumped into the United States.”
Retreading volumes have declined year over year at Eastern Iowa Tire Inc. as well. “In our area of the country the first quarter is always slow,” says Gary Van Blaricom, president and CEO. However, 2017’s first quarter was very good for Eastern Iowa Tire, making comparisons to 2018’s first quarter challenging for the Davenport, Iowa-based company, which has five plants.
Van Blaricom attributes some of the loss to original equipment purchases made by his retreading customers. Tier 4 tires are responsible, too. “Cheap Chinese import tires have greatly affected retreading. When you consider that the price of a cap and casing is about the same price as what you can sell a Tier 4 Chinese tire for, most customers are probably going to go with the new tire and just throw the casing away.” To help boost retread sales, the company has incentivized its salespeople on retreading this year in addition to their normal commission programs. Van Blaricom also notes that Bandag has come out with some programs which have “helped us a considerable amount.”
Casing crunch causes concern
The volume of low-cost Chinese imports declined briefly last year, according to Brad Raben, vice president of commercial sales at Raben Tire Co. LLC of Evansville, Indiana. But when the U.S. International Trade Commission (ITC) voted to not levy duties on Chinese truck and bus tires in March 2017, the flow of imports resumed.
“I don’t think there’s any relief in the near future,” he says. “It’s a concern that retreading is falling to the Chinese tires, but the real surprise this year is casings.” In contrast to a few years ago when medium truck tire casings were in short supply, this year they are plentiful.
“Is there less demand for retreading or are we just kind of caught up on a cycle?” wonders Raben. “We were hoping lower prices with casings would make us more competitive with Chinese tires, but it seems like retreading is flat.”
In contrast, casings are in short supply for retreaders of off-the-road tires. Jim John Jr. is president of Craft Tire Inc., which does business as Shrader Retreading in Uniontown, Pennsylvania. He says there’s a possibility of a slight shortage on some OTR tire sizes.
“It does appear that some sizes, specifically larger sizes then moving down to the smaller sizes, may be short in the middle of 2018,” he says.
Retreaders could step in to make up for a shortage of replacement OTR tires, but the availability of quality retreadable casings is a concern, according to John. Conversely, short supply of quality major brand casings along with increased retread rubber and material costs will continue to make competition against Tier 3 new tires difficult on smaller OTR sizes.
“When the tire shortage ended and pricing fell in 2015 and 2016, folks just started running tires to destruction,” says John. Equipment operators purchased low-cost Tier 3 tires that were not as retreadable as Tier 1 and Tier 2 tires. “Running the major brands to destruction as opposed to retreading them and incorporating off-brand third tier tires is really going to put a strain on quality casing supply.”
Today, Hickman says, his employees are pushing the value of products and services to their customers, and he agrees with John’s assessment of the casing situation today. “Finding good quality casings is becoming more difficult,” Hickman says. “We’re expanding our buying market to compensate.”
Retreading represents approximately 50% of annual sales at BestDrive LLC. The Continental Tire Americas LLC subsidiary says that is the same mix as prior years, and overall sales have increased. “In terms of making our products more competitive, we are seeing increased demand for retread tires that ‘look like new, run like new,’ and that’s the promise of the ContiTread brand,” says Steve Postel, Continental’s head of retail for commercial vehicle tires in the Americas region and head of BestDrive.
“Many of the tread patterns and rubber compounds match what is used in a new Continental tire, which helps our customers feel confident that they can rely on their ContiTread retreads. Continental has also been offering a cap and casing promotion this year that is making the prices even more competitive,” says Postel. He adds the company is focused on increasing its distribution network to make ContiTread premium retreads available to more fleets across the U.S.
Bridgestone Americas Tire Operations LLC, which does business as GCR Tires & Service, operates 26 plants, three less than last year and has introduced two Bandag-exclusive equipment innovations designed to improve non-destructive inspection to assure curing system integrity. Additionally, Bridgestone launched a “Bandag Built for Better” campaign aimed at educating fleet customers on the merits of retreading.
Commercial tire market realigns
As more Chinese tires enter the U.S. commercial tire market, both Tier 1 tire suppliers and dealer networks across the country have begun to make adjustments to deal with this, and other, new, low-cost competition. Michelin North America Inc. sold seven of its nine Tire Centers LLC (TCi) retread plants to commercial dealers in the last year. The buyers included Toledo, Ohio-based Shrader Tire & Oil Co., which bought one plant. Two plants were sold to T&W Tire LLC., based in Oklahoma City, Okla. Greensboro, N.C.-based Snider Tire Inc. purchased four TCi retread plants.
Love’s Travel Stops & Country Stores Inc., which does business as Love’s Truck Solutions LLC, sells retreads as well as new tire brands at Love’s Truck Tire Care and Speedco locations, which totaled more than 330 as of March 2018. The Oklahoma-based truck stop chain bought Bridgestone Americas Inc.’s Speedco network, which provides quick lube and inspection services to the trucking industry, in September 2017.
In 2016, Van Blaricom organized a group of dealers into Tire Service Solutions, or TSS for short, to better compete against truck stop chains like Love’s Travel Stops as well as the TA Truck Service Commercial Tire Network operated by Travel Centers of America LLC. TSS also enables its member dealers to compete more effectively against large dealers that cover a large geographic area.
“TSS is a group of independent dealers that have banded together to provide service and product to all of our customers who travel the geographic area that we encompass, which is an eight-state area,” says Van Blaricom.
Customers of TSS member dealers receive the same pricing regardless of their location. “It gives us the ability to capture customers that might not be in our area. For instance, if Royal Tire has a large customer coming through here, that customer is going to get the same pricing as they would get at Royal Tire. They’re not going to be taken advantage of with $200 used wheels and $400 cap and casings,” says Van Blaricom. “Additionally, if Royal Tire, for example, has the business of a large trucking company with a location in Iowa, then we will probably get that business as well.”
TSS also is a buying group whose purchases represent about $600 million in sales. To further lower costs, the group is considering performing billing, payables and receivables functions for all the member companies.
“It’s a concept that is working well for us. It isn’t new, but we’re actually going about it in a different way than some of the other groups that are out there,” says Van Blaricom.