NTDA: Tyre Shortages Mean Price Rises

The National Tyre Distributors Association (NTDA) and its wholesale arm, the Tyre Wholesalers Group (TWG) have warned that "substantial" price rises are imminent. The core raw material price increase reasons for the shortage are nothing new, but the fact that a number of tyre manufacturers closed factories in recent years means there is now insufficient capacity to make up the shortfalls. In addition the fact that last winter was particularly severe across much of northern Europe led to unprecedented demand for winter tyres. With this year's winter selling season due to begin shortly, manufacturers are replenishing stocks of winter tyres in preparation.

Another factor is the improvement in sales of cars; many of the larger tyre manufacturers are contractually committed to supply certain numbers of tyres for original equipment fitment on cars, thus reducing availability for the replacement market. But it is not just the large manufacturers which are suffering, as David White, the National Chairman of the NTDA described the situation as “the worst we have seen”, adding: “the shortages are affecting all manufacturers and all sectors of the market, from premium brands to budget tyres.”

Tyre shortage ‘the worst we have seen’

It had been thought that the US imposition of a levy on tyres manufactured in China would lead to dumping on the European markets, but this just didn’t happen. Ashley Croft, the chairman of the NTDA’s Tyre Wholesalers Group which represents all the principal tyre wholesalers in the UK market commented: “Any reduction of supply to the USA was both minimal and short-lived, when it was realised that the levy was causing prices to rise. “The supply situation is steadily worsening, with many tyre retailers and wholesalers operating on drastically reduced levels of stock and in danger of running out of some sizes.”

The situation for run-flat tyres is slightly different; while run-flat sizes are suffering from the same lack of availability, it appears that some manufacturers have kept back a buffer stock for their car dealerships. Thus, while a motorist wanting a replacement run-flat may not be able to get it from his local fast-fit, he should be OK if he goes to a franchised dealership, according to the NTDA

Rising prices

The result of these factors is said to be shortages, which have already led to some price increases, but other economic factors make further rises inevitable. Chief among these is a series of increases in the costs of raw materials, with prices of natural rubber doubling over the past eight months. Prices of steel and oil have also been driven steadily upward and show little sign of coming down. The tyre manufacturers have tried to absorb these costs as much as possible, but eventually they have to be passed on. Because raw material costs make up a greater proportion of the overall cost of a budget tyre, compared to a premium brand, it is said to be the budget manufacturers that are suffering more.

These factors are specific to tyre manufacturing, but the industry is subject to outside economic pressures, such as the affect of currency exchange rates. Then there are rising transport costs, with the increase of shipping a 40′ container rising almost fourfold; bad news for those who import tyres from the Far East.

Closer to home, UK diesel prices have risen by 25 per cent over the past year and look set to continue climbing.

According to David White, the availability position is unlikely to improve in the short term and the shortage of popular sizes of tyres, together with the economic factors outlined above, means that the motorist should brace himself for some hefty price rises, assuming that they can lay their hands on the tyres in the first place. He also pointed out that the 2.5 per cent hike in VAT proposed for January will increase tyre prices.

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