Flat tire, by Flickr user Lissalou66
TCC's Frugal Shopper ALERT: If you drive a small, aging econocar—or even a mid-size sedan—and have been thinking about new tires, get them now, because several weeks from now you might be paying $20 or $30 more for a set.
Last month the federal government imposed a controversial new 35-percent tire tariff on passenger car and light-truck tires imported from China. The tire industry—including a number of retailers—had been opposing the tariff and predicted that prices will rise as a result-at an inopportune time, with affordable tires most affected at a time when owners can't afford the extra cost.
The tariff was heavily influenced by the United Steelworkers Union, which represents a large portion of U.S. tire workers. The Steelworkers appealed to the Obama administration that U.S. tire-related jobs are in danger and that the surge in imports from China over the past several years required action. From 2004 through the end of 2008, tire imports from China increased by nearly 300 percent as U.S. production fell by more than 25 percent and 4,400 jobs were lost. Another 2,400 were expected in 2009.
Opponents of the tariff, along with representatives of the tire industry and some industry analysts, have said that companies will simply move tire production to another inexpensive manufacturing location, like Brazil or India.
In the meantime, China is considering temporarily rolling back a VAT (value-added tax) applying to tires, which might help reduce the market impact.
Yet more than a month later, U.S. tire retailers still haven't significantly changed their prices. At least at this time it looks like the aftereffects of the tire tariff won't hit the market as a whole.
"The major manufacturers have very little production in China...So we don't see an impact there, as a direct result," said Matt Edmonds, vice president of Tire Rack, a company that sells specialty and performance tires. Edmonds says that in the bulk of the tire market, prices won't rise appreciably.
"There could potentially be some price increases across the board," said Edmonds, due to shorter supply that might affect the whole market, but it would be temporary as the affected companies would look to procure tires from other factories elsewhere in the world. "Right now we're not seeing any."
A representative of a major discount tire retailer, who would only speak off the record, said that her company hasn't seen any impact on tire prices yet, though it's still a little early to say there won't be any ripple in cost, and it depends on the choices that tire companies make in coming months about supply.
But it still might be too early to say whether this will affect a significant portion of the market, and owners of certain types of vehicles could expect a price bump. Several manufacturers have announced price hikes, but they haven't yet affected the retail level. Bridgestone Americas announced last week that prices will increase by up to 15 percent on some passenger and light-truck tires under the Primewell, Firestone, and Dayton brand names, and Pirelli announced last week that it will raise prices 10 percent on its P4 and P5 P4 Four Seasons and Cinturato P5 passenger tire lines. Cooper and Toyo have also said that prices will rise between 10 and 15 percent on some of their most affordable tires.
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These are all budget-priced aftermarket tires; the tariff is unlikely to affect the market for performance or luxury vehicle tires, or even prices on new vehicles, in the long run. Rest assured, the cost of a burnout in a Chevy Camaro SS or Ford Mustang Shelby GT500 won't rise. However, if you drive a small, inexpensive car like a Chevrolet Aveo, or even a compact like a Toyota Corolla, you're likely going to take the largest hit from the tariff. And it could make a difference for those meticulously watching their auto budget, though we might see drivers trying to stretch their balding treads a little longer.
Here's why several experts we spoke with think that a price adjustment is coming at the affordable end of the market, with a ripple to the middle. On the original-equipment (OE) side, no manufacturer currently supplies new-car tires from China (though several models of temporary spares are made there). However in the aftermarket, more than 39.5 million units in a 190+ million market are supplied by China. That's one fifth of the market. And according to data from Crain's Tire Business, a trade publication covering the tire industry, we've come to rely on China to supply the smallest sizes. As of last year, 54 percent of U.S.-market 13-inch tires and 46 percent of 14-inchers were from China. For 15-inch tires, China supplies just under a third, and for 16-inch and above the supply becomes insignificant.
So you see, while most drivers shouldn't sweat this one, small-car owners and cheapskates might want to get some new rubber before the price hike reaches your corner tire shop.
Watching every penny of your motoring budget? Want to know when, where, and how to save the most when shopping, maintaining, and upgrading? You’ve found the right place with our Frugal Shopper column—check back at TheCarConnection.com for more.