Rising Tire Prices May Affect Auto Care Shops

Feb. 2, 2017

As Michelin, Goodyear, Dynamic Tire Corp. and Carlstar raise tire prices in 2017, shop owners grapple with the adverse effect it could have on margins.

Feb. 2, 2017—Michelin became the latest tire distributor—along with Goodyear, Dynamic Tire Corp. and Carlstar Group—to raise its tire prices in 2017. 

Michelin stated it is increasing tire prices by 8 percent for passenger, heavy truck, earthmover, industrial-handling, agriculture and two-wheel segments across all company's brands in the U.S., Canada and Mexico. This increase represents Michelin's first since 2012, due to net effects of raw material prices as well as what the company calls its "market-leading technology enhancements, innovations" and other market conditions.

This could trickle down to have an effect on automotive repair shops specializing in tires, says Ryan Clo, owner of the auto repair shop Dubwerx LLC in Cincinnati and a Ratchet+Wrench editorial advisory board member, noting repair and tire shops will need to promote more value if they want to maintain tire margins against stores that handle larger volumes.

“For shops like mine that do a majority of service work, it won't matter as much,” Clo says. “Tires may be low margin but when looked at on parts profit per hour, they do very well even at lower margins like 15 percent when compared to 'normal' service jobs.

“For tire specialty shops whose financial model depends on every margin point on tires, it's probably going to hurt. It might force them to do more service work, or go further into tire-only and do volume to make up for lost profits.”

Chris Monroe, owner of Monroe Tire & Service in Shelby, N.C., said that with increasing tire SKUs (stock keeping units) and multiple daily deliveries, today's tire dealer is stocking less and ordering more frequently.

“As wholesale costs fluctuate, a dealer trying to earn consistent margins will adjust consumer pricing accordingly,” Monroe says. “We remain very competitive with tire pricing, but tend to spotlight our installation process supported with the right tools and experienced technicians. There will always be a cheaper this or that, but ultimately we are in the service business.”

Effective Feb. 1, Goodyear said it would increase prices up to 8 percent on all its consumer and commercial brands. The company also cited escalating raw material costs as the reason. This is similar to what’s being done by Dynamic Tire and Carlstar, the latter of which signified prices could increase up to 12 percent starting March 1.

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