January 2006

Passenger tire replacement shipments to set record

Washington, DC— Passenger replacement tire shipments are anticipated to grow to a record-setting 205 million units this year marking the first time shipments have exceeded 200 million units in any given year. Similarly, tire shipments for the combined original equipment (OE) and replacement consumer and commercial sectors are expected to increase by 2.2 percent compared to 2004 as a result of continued steady economic growth.

Citing the minimal impact of rising energy costs on driving behavior, steady growth in tire shipments is expected to continue through 2006 as the moderate economic expansion continues, according to the Rubber Manufacturers Association.

Overall, the combined OE and replacement shipments for 2005 auto and truck categories are anticipated to increase by approximately 7 million units, or 2.2 percent to over 325 million units. Tires sourced through imports will fulfill all of the increase in domestic shipments for 2005 and 2006 for all categories and especially passenger replacement.

The group projects continued growth in total tire shipments of approximately 2 percent in 2006, reflecting increases in the nation’s Gross Domestic Product (GDP) and Industrial Production Index (IPI).

RMA’s Tire Market Analysis Committee forecast for key categories and their respective segments for 2005 and 2006 include:

Original Equipment Passenger Tires
The number of units shipped in 2005 will be unchanged from 2004’s 53 million units as domestic auto and light truck production remains constant. A slight decrease of less than one-half of one percent is forecast in 2006 in line with the decrease in vehicle sales. This forecast was made before General Motor’s recent announcement to close plants and may need to be revised when a clearer understanding of the dynamics between domestic sales and production by U.S. and foreign manufacturers can be ascertained.

OE Light Truck Tires
A decrease of 2.5 percent is expected for 2005 to approximately 7.7 million units as consumers opt for smaller-sized cross-over utility vehicles (CUVs) that use passenger tires. Similarly, a further 2.6 percent decrease is anticipated for 2006 as CUVs gain in popularity.

OE Medium/Wide-Base Truck Tire
Sales of commercial truck vehicles will experience solid growth through 2006 due to replacement demand and in response to future changes in EPA regulations. The net effect will be a 10.3 percent growth in OE shipments for 2005 to 6.3 million units. Growth is expected to continue in 2006 at greater than 6 percent after which growth will be curtailed as EPA regulations take effect.

Replacement Passenger Tire
The passenger replacement market will increase by 3.2 percent to more than 205 million units for 2005 – the first time that this market will exceed the 200 million mark —- and over 6 million units more then the 198.9 million-unit record set in 2000. Shipments of replacement passenger tires designed for sport and cross-over utility vehicle applications jumped by 15 percent to 40 million units. Additionally, the High and Ultra High Performance markets increased 5 percent and 14 percent, respectively, compared to 2004. Growth is expected to moderate slightly in these categories for 2006. Despite higher fuel prices, steady growth in this segment is largely attributed to continued growth in the number of vehicles on the road and increasing vehicle miles traveled.

Replacement Light Truck Tire
This market segment is projected to decrease by 1.4 percent to approximately 36 million units in 2005 but rebound by 2.7 percent in 2006, reflecting the greater number of vehicles on the road and growth in the commercial sector that use light truck vehicles.

Replacement Medium Wide-Base Truck Tire
This market is forecast to grow to 17 million units, or 4.5 percent, in 2005 mainly as a result of the continued growth in industrial production and freight movement. Further growth of approximately 2 percent will be realized for 2006.


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