Editors note: This article is part of a three-part package that addresses fleet maintenance costs in 2016. Read related articles covering maintenance costs and oil service costs.
Passenger car tire expenses declined 7% in calendar-year 2016 compared to CY-2015. There were various factors contributing to the decline, but the key reason was tire price stabilization due to less volatility in prices for the commodities used to manufacture them. The cost of commodities used to manufacture tires, such as the price of oil and rubber, continues to be the key factor driving the price of replacement tires for passenger cars. These commodity prices were flat during 2016 compared to the prior year.
Another factor exerting downward pressure on replacement tire prices was improvement in tire inventory that balanced supply with retail demand.
“The decline in tire costs in 2016 was the result of a supply and demand dynamic,” said Steven Janke, consultant, strategic consulting services for Element Fleet Management. “In 2015, many fleet owners purchased vehicles that used unique tire sizes, which, unfortunately, were in limited supply. These tires have become increasingly available in 2016, reducing overall cost.”
Trend to Larger Tire Diameters
The increase in OEM automobile wheel diameters has also driven up the price of fleet replacement tires, primarily because the larger the tire, the greater the manufacturing expense.
“The trend to larger diameter tires was started by consumers who wanted a better look for their vehicle by having a larger tire/wheel assembly to fill their wheel well,” said T.J. Tennent, engineering manager for Bridgestone Americas Tire Operations. “The auto manufacturers decided to produce vehicles with the larger wheels as optional equipment to keep the customer coming to the dealership and maintain some control of this phenomenon, which is extremely profitable.”
During the past decade, tire diameters have increased in size to as much as 24-inch, 26-inch, and even larger.
“But, with the larger sizes on vehicles, the wheels were getting damaged from road hazards, pot holes, etc. The replacement cost of the wheel and tire was very expensive, but now, the sizes are more reasonable,” said Tennent. “I don’t think we will ever see diameters larger than 24-inch on a mass market level. From a fleet perspective, the larger sizes would not be economical due to the expense from tire/wheel damage from road hazards and higher loads.”
Inventory Challenges
When ordering vehicles with unique tire sizes, many fleet drivers are surprised that they are unable to locate a replacement tire due to inventory constraints.
“When changing to a new model or package on your selector, check for any impact caused by unique tire sizes, different motor oil requirements, or other new service requirements,” said Jason Roberts, case manager, managed maintenance for Element. “These may significantly impact maintenance costs and replacement tire availability.”
Unique tire sizes and specs on certain vehicles pose a challenge to fleet managers when a replacement tire is needed because there is often limited availability. “As a result, special vehicle-specific tire sizes can impact tire availability,” said Janke.
Not only is there limited availability of unique tire sizes for individual vehicle models, but there may also be a limited number of store outlets that stock them.
“Depending on size, construction, and type of vehicle, this does happen. For instance, a few years ago, how often did you see vehicles on the road like the Ford Transit and Transit Connect, Nissan NV 200, or the Ram ProMaster vehicles? In many cases, the tires for these vehicles are unique. They require replacement tires that are Euro Commercial ‘C’ tires. There is no ‘LT’ or ‘P’ in the size designation, and the load carrying capacity could be significantly higher than a conventional tire,” said Tennent. “The availability of a replacement tire depends on many factors: volume, production costs, type of vehicle, and whether the tire will be profitable. Therefore, in some cases, there could be only one tire manufacturer with a replacement tire that is suitable for that vehicle.”
Forecast of 2017 Tire Costs
Predicting future tire costs is very difficult due to the many variables that influence tire pricing. One factor proven to exert upward pressure on replacement tire costs is the ongoing trend to larger diameter tires and unique tire sizes. As auto manufacturers develop unique tire sizes for new-model vehicles, it impacts the replacement tire supplies for one to two years, as other aftermarket tire companies may not immediately meet the demand for these tire sizes. This lag time limits the selection and availability of replacement tires.
Another unpredictable cost variable is the price of commodities, such as oil, rubber, and steel, which are three key ingredients needed to manufacture tires.
“Tire costs are driven by raw materials cost. If raw material prices stay consistent, tire prices stay consistent,” said Tennent of Bridgestone Firestone. “Those costs control most of the fluctuation in tire prices.”
The conventional wisdom is that there is a low probability of price increase unless raw material prices increase due to unanticipated geopolitical tensions or severe weather conditions that impact rubber harvests. Another wildcard is if global economic growth accelerates, increasing demand vis-à-vis supply, which could exert upward pressure on tire prices.
Tire Manufacturing Innovations
One factor exerting downward pressure on fleet tire expenditures is the ongoing improvement in tire quality, which has resulted in longer wear life during the past decade. Tire tread life has been extended by 10% in the past 10 years. This has helped offset some of the recent price increases since the expense is spread out over a longer period.
There are a number of manufacturing innovations being explored and implemented by tire OEMs to reduce costs and extend wear life. One approach has been to research the use of alternate materials and commodities to manufacture tires.
One new material that is being researched is parthenium argentatum (guayule). This is a flowering plant that tire manufacturers are experimenting with as a substitute for latex rubber from rubber trees.
“Guayule is easily grown and has characteristics similar to latex rubber,” said Tennent. “In fact, Bridgestone built the first tire manufactured completely of guayule rubber in 2015.”
Cost of natural and synthetic rubber is determined by market demand, raw material prices, and production costs. One advantage to tires made of natural rubber is that it conforms to the road surface when driven. Other advantages to natural rubber is that it runs cooler and is cut and chip resistant.
“Natural rubber is made from latex of the hevea brasiliensis tree. Synthetic rubber is made by the polymeriazation of a variety of petroleum-based precursors called monomers,” said Tennent. “Approximately 40% of a tires weight is natural rubber. Of that, approximately three-quarters is natural rubber and one quarter is synthetic rubber. Each of the various components of a tire can have a different mix of natural and synthetic rubber.”
ROI on Eco-Friendly Tires
Low-rolling resistance and eco-friendly tires have demonstrated the capability of increasing a vehicle’s fuel economy; but they have a higher initial cost and faster tread wear. Fleets report that there has been a longer-than-anticipated ROI for the higher cost low-rolling resistance tires. In addition, fleet managers report driver complaints about the ride quality of run-flat tires.
“Moving to low-rolling resistance tires when replacing tires may not prove cost-effective for a car fleet as payback may extend beyond typical replacement cycle,” said Roberts.
Focus on Maintaining Tires
Tire operating costs is a perennial concern with fleets, which can be effectively addressed by driver attention to tire inflation levels.
“There is an unbelievably simple answer to reducing tire operating costs — maintain your tires air pressure,” said Tennent. “I can’t tell you how many times I have been asked to investigate a fleet issue involving tire wear or fuel costs and it is directly associated with the fleet not properly maintaining air pressure.”
Without regularly checking air pressure, passenger and light truck tires will lose approximately 1psi of air pressure per month and 1psi per 10 degree drop in ambient temperature.
Follow @automotivefleet on Twitter
from Automotive Fleet http://ift.tt/2lqblrV
Sourced by Quik DMV - CADMV fleet registration services. Renew your registration online in only 10 minutes. No DMV visits, no lines, no phone mazes, and no appointments needed. Visit Quik, Click, Pay & Print your registration from home or any local print shop.
No comments:
Post a Comment