State of the Commercial Truck Tire Industry

You can’t talk about trends in 2020 without touching on the impact the COVID-19 pandemic had and continues to have on just about every aspect of the business right now.

“Certainly, the COVID-19 pandemic has impacted the commercial trucking industry, and we anticipate the market will continue to be dynamic as we transition into post-crisis recovery. The trucking freight sector has rebounded, but is still well below the previous year. We have seen an additional recovery in the OE market. Still, we anticipate the OE tire market will be down approximately 30-45% vs. 2019,” said Ben Johnson, director of TBR brand and channel marketing, U.S. and Canada for Bridgestone Americas Tire Operations.

There was a strong contraction noted in the commercial truck tire market in the second quarter. 

“The nationwide shutdown caused by the COVID-19 pandemic certainly played a role in the contraction. Heightened uncertainty around the economic impact of the pandemic led many businesses to focus on preserving working capital and safeguarding cash flow, which temporarily reduced spending on tires as well as many other items,” said Tom Fanning, Continental’s U.S. market manager for truck and bus tires.

But, Fanning pointed to shifts occurring in consumer behavior. 

“Where refrigerated carriers might have been supplying restaurants in the past, there might now be a shift toward grocery stores. Those who used to supply large retail stores might be redirected to distribution hubs for e-commerce last-mile delivery instead. The pandemic continues to affect many aspects of the industry,” he said. 

The COVID-19 pandemic has impacted everything, from the economy to how everyone goes about their everyday lives. Due to being considered an “essential provider,” the trucking industry has fared reasonably well.  

“The original equipment (OE) market has suffered the most, but it showed signs of a rebound in June and July while August preliminary numbers reflect the same trend. After a very weak April & May, the replacement tire industry has been strong in June & July, with August preliminary numbers also showing significant growth versus 2019. The entire truck market is participating,” said Walt Weller, senior vice president at Double Coin Tires. 

But this has also caused some creative problem-solving. “In response to challenges presented by COVID-19, we are seeing the commercial trucking industry gravitating toward products that help maximize the value of their tire investments — one of their highest maintenance costs — and increase overall vehicle uptime,” said Dustin Lancy, commercial product marketing manager, regional/urban for The Goodyear Tire & Rubber Co.

Like much of the U.S. economy, the truck tire market is still in recovery mode following the COVID-19 pandemic outbreak, though sales returned to 2019 levels sooner than some expected. 

“The market has been at healthy levels over the past three months, supported by inventory replenishment, but also boosted by increased consumer demand for electronics, home furnishings, home improvement materials, plus others, but headwinds linger. The strong level of consumer spending has been supported by government stimulus. The additional unemployment benefits that were reduced at the end of July leave a hole in the economy while unemployment levels remain elevated,” said Grant Edgeley, market forecast and insights manager for Michelin North America.

Beyond the pandemic, several other trends are impacting the tire market, including last-mile delivery.

“In a word, I’d describe the market as volatile. Light- and medium-duty sales continue to expand with the growth of Amazon and other last-mile delivery fleets,” said Dan Funkhouser, vice president of commercial sales at Yokohama Tire.

Overall, the commercial tire business has been consistent since late spring. 

“Market conditions, despite COVID-19, have been at or slightly above last year. Light- and medium-duty units that fall in final-mile delivery seem to have remained consistent,” said Robert Williams, vice president of TBR Sales for Hankook Tire America Corp.

There is currently a macro trend where the North American commercial fleets are choosing smaller vehicles (light- and medium-duty) over heavy commercial vehicles. 

“There are several influences on this including environmental, government regulations, commercial driver’s license (CDL) needed for heavy commercial vehicles, growth of e-Commerce and parcel delivery,” said Chris Novak, business model leader Urban mobility for Michelin North America.

Growth in the urban delivery of goods (parcel and e-commerce driven) has driven growth in light-duty commercial vehicles. 

“The growth of e-commerce has leaped 10 years in just a few short months. Over time, the commercial light-truck tire market is growing at a much faster rate than the large truck tire market,” Novak added, noting this is also true for medium-duty truck tires. 

The truck tire market remains extremely competitive, with the major manufacturers looking to maximize performance with value. 

“We continue to see the advancement of ‘smart’ tire technology. Automatic tire inflation systems (ATIS) or tire pressure monitoring systems (TPMS) are becoming more widely utilized to enhance tire maintenance. Plus, more fleets are utilizing fleet management systems to optimize tire performance with the total cost of ownership (TCO) of the tire,” said Bob Klimm, director, TBR for Falken Tires. 

And the commercial truck tire market continues to evolve as we make our way through 2020. 

“Final-mile fleets have been bolstered by the drastic increase in online purchases. More commercial van fleets are coming onstream and looking for ways to improve their efficiencies. The 19.5-inch segment of the trucking industry is expected to continue to grow as fleets look to these platforms to attract drivers to the trucking industry and capitalize on the versatility of the upfitting available,” said Dave Johnston, senior manager commercial business and product development for Toyo Tire U.S.A. Corp.

Truck Tire Pricing Trends

Truck tire pricing is stable, but Weller of Double Coin Tires warned this could be affected by a potential shortage in the remainder of 2020.  

“Domestic manufacturers shut down factories in April/May to make them COVID 19 compliant with best practices designed to keep their employees safe. Production dropped by approximately 72% in April and rebounded slightly at 51% in May. June and July production was at approximately 65% of capacity. The rest of the year is anyone’s guess, but some domestic manufacturers are forecasting a return to a maximum capacity utilization rate of 80% due to the COVID protocols that are being implemented in their plants. Capacity utilization in the tire industry is the biggest driver of cost so that coupled with demand issues could be a catalyst for price increases in the future,” Weller said.

Williams of Hankook Tire also noted pricing stability, sharing “pricing has remained consistent on the sell-in and sell-out side. It seems to have been a buyers’ market over the past few months.”

As the trucking industry recovers back to pre-pandemic levels of activity, the need for tires is growing in balance to the ability of manufacturers to ramp up supply when the market is examined at the national level.  

“As the trucking industry recovers back to pre-pandemic levels of activity, the need for tires is growing in balance to the ability of manufacturers to ramp up supply when the market is examined at the national level. The demand pressure on the tire supply is sufficient to ensure stable prices vs. year ago. Raw material costs are likewise not creating pressures to force a change in tire prices to dealers and fleets. The market is experiencing some needed price stability at present,” said Nick Nalepa, director of Region Market Analysis and Pricing for Michelin North America.

But the raw material pricing stability may not last and are not being seen by everyone. 

“We have seen increases in certain raw material costs, and similar to other businesses and industries, we have faced increased costs related to the COVD-19 pandemic,” said Johnson of Bridgestone Americas Tire Operations.

A final impact on pricing right now is related to tire tariffs. 

“With the tariffs imposed on Chinese commercial truck tires at the start of 2019, the baseline for an entry-level product was elevated. However, most non-Chinese built brands have only introduced very slight increases since the beginning of last year; and have remained steady,” said Raul Garcia, product planning for Falken Tires.

Vocational Truck Tire Trends

The last-mile delivery and middle-mile-related business segments are increasing with more at-home deliveries. 

“We attribute the growth in at-home deliveries, in part, to the pandemic. We anticipate these shifts in consumer behavior will persist, and that delivery-related business will remain strong in the post-pandemic market,” said Johnson of Bridgestone Americas Tire Operations.

Last-mile delivery for e-commerce has boomed during the pandemic. 

“A consumer trend, which has been accelerated by the pandemic, is online shopping, leading to a massive increase in last-mile delivery demand, according to large players in that segment. People quarantined in their homes with the inability or unwillingness to go to shopping malls, retail outlets, and even grocery stores led to increased business and in-home delivery,” said Fanning of Continental. “For example, since March with implemented government lockdown restrictions, Amazon has hired 175,000 seasonal workers to meet the surging demands and plans to keep 75% of them permanently. Last-mile delivery and regionalized business have seen continual rise throughout the last decade, with no signs of slowing down.”

Why does this matter for tires? 

“There is a need for tires that are durable enough for urban delivery of goods,” said Novak of Michelin North America. 

Local delivery vehicles and the tire sizes used will be smaller. “Look for a wider variety of tread depths, tread designs, and sizes in this segment to satisfy the unique needs that these vehicles represent,” Weller said. 

E-commerce growth will continue to stimulate added demand for pick-up and delivery type tires. “Tires that have to handle strenuous demands of stop and go, within congested spaces and higher torque levels,” said Garcia of Falken Tires. 

Currently, refuse truck fleets appears to be operating at a normal level. 

“People might be generating more trash at home versus going out to restaurants, which makes residential track pickup even more essential during this time. Many fleets are implementing enhanced safety measures for refuse employees,” said Fanning of Continental.

Funkhouser of Yokohama Tire has seen Residential waste business increase due to people spending time at home. 

“The refuse fleet business is heavily dependent on retreading. The Yokohama casing is known for its retreadability and fills that need. Grocery food deliveries have increased, and restaurant and institutional food sales have decreased since people are unable to eat out as much as they have in the past. This is increasing demand for regional products that can sustain curbing damage and still be retreaded,” Funkhouser said.

Construction appeared to hit a lull during the second quarter of 2020, but Fanning noted that residential construction is now coming back strong. 

“Spending more time at home during the pandemic may have influenced people to upgrade their living space, while others look to downsize due to the economic uncertainty. Commercial real estate is cautiously optimistic as well. This is very different from the 2008-2009 recession, which saw the construction industry suffer severely due to the housing crash,” said Fanning of Continental.

Refrigerated vans and food products are staying particularly resilient during the COVID-19 pandemic. 

“The decreased demand from restaurants has been counteracted by the surge in demand for groceries. People still need to eat. Loadings and tonnage for refrigerated vans with food products will be down by approximately 2% to 4%, but this is a far cry from other sectors such as flatbeds, which are expected to be down 12% or more,” Fanning added.

As electric trucks inch closer to day-to-day reality, Gary Schroeder, Cooper Tire Executive Director Global Truck and Bus Tire Business, noted the differences in torque a combustion engine and an electric motor produces would impact tire design — both tread patterns and compounds. 

“Most likely tread patterns will be impacted the most. Also, the medium-duty segment is an emerging segment as ecommerce continues to grow. Having a complete tire portfolio meeting needs of Class 1 thru Class 8 vehicles in delivery fleets is key. The use of national account programs for super-regional and national fleets will grow in importance,” Schroeder said.

Last-mile delivery and refuse applications are two vocations that are positioned to start using electric vehicles. 

“EVs align to these vocations nicely because they can return to their yards daily for charging. They can install the charging infrastructure needed and charge vehicles each night before they are used for service the following day. Miles to removal, start/stop traction, and scrubbing remain among the top tire needs for these fleets,” said Lancy of The Goodyear Tire & Rubber Co.

Looking into the Future: 2021

No one knows what the future holds, and after 2020, I think we all realize many things can impact future trends, many of which we have zero control over. 

Overall, the tire experts are optimistic and see growth on the near horizon. 

“While we anticipate there will be continued volatility in the market, we expect to see a stronger 2021 with replacement volume growth. The OE market will improve but is likely to remain challenging,” said Johnson of Bridgestone Americas Tire Operations.

Some anticipate a return to prior year market levels. 

“In 2021, we expect to see a return to 2019 market levels as well as an increased understanding of the pandemic’s impact on the economy, and therefore on the trucking industry,” said Fanning of Continental.

As business and consumer confidence improves, many expect tire inventories to return to “pre-COVID” levels. 

“However, headwinds linger as high unemployment continues to pose a risk to consumer spending. The consumer supports approximately 70% of the U.S. economy. Strong consumer spending levels are needed to support freight volumes. We foresee the current driver shortage to improve in 2021. As the recovery continues, we anticipate increased business confidence levels, leading to increased driver employment and increased capacity,” said Edgeley of Michelin North America.

Driving growth continues to be last-mile delivery fleets. 

“We’ll continue to see an increase in delivery truck tire sales, as well as new segments being created as manufacturers strive to carve out additional market share for themselves. One example of this is a trend with three-peak mountain snowflake (3PMSF) commercial truck tires. In the past commercial tires were seemingly exempt from snow traction testing to achieve 3PMSF. But we’ve started seeing more brands adopt this marking to appeal to fleets operating in regions that experience inclement weather,” said Klimm of Falken Tires.

But, there is still a lot of uncertainty swirling that makes forecasting very difficult. 

“Looking at the market the last two to three years does point to the possibility of pent up demand in the replacement channel,” said Schroeder of Cooper Tire.

Toyo Tires is forecasting the truck tire market to continue to recover in 2020 and grow in 2021 with increased demand for specific products as projects come back online. 

Looking into the Future: Beyond 2021

If forecasting trends into next year is tough, looking beyond 2021 might just be impossible, but that didn’t stop our tire experts from making their best inferences based on current trends. 

“We operate in a dynamic and evolving industry. Automation, electrification, and changing consumer trends will continue to impact the industry at large. The needs of fleet customers are evolving as a result. Delivering top-performing tire products won’t be enough to meet a fleet’s needs in the future. In an automated fleet environment, downtime is the enemy. Fleets will look to partner with manufacturers and service providers who can help them maximize their tire assets through tire-centric solutions that improve safety and efficiency and make preventive tire maintenance easier.

Bridgestone continues to work to evolve the complete suite of products, services, and solutions we offer to meet the future needs of our fleets,” said Johnson of Bridgestone Americas Tire Operations.

Overall, barring any unforeseen political disruptions, the future looks bright. Fleets are shifting more and more toward the lowest overall driving cost approach. 

“Shifting to the lowest overall driving cost approach means seamlessly collecting and analyzing tire data to evaluate and improve performance. We also see an increasing need to monitor and predict the impact of other factors, such as driver behavior and vehicle maintenance,” said Fanning of Continental. 

Funkhouser of Yokohama added that “no matter what new technologies are in store, fleets will always be looking for tires that offer the lowest total cost of ownership and get the job done.”

To say the truck tire industry has gone through some changes this year is an understatement.

“Changes this year included fleets downsizing, driver reduction, etc. Final-mile delivery has also continued to gain in popularity,” said Williams of Hankook Tire America Corp.

EV is a global trend, and the industry has a high demand for low rolling resistance (LRR) products that can handle heavy loads. 

“This vehicle trend first started in urban, pickup and delivery areas, and Hankook has already adapted to the change by adjusting load index development,” Williams added. 

As automakers evolve to achieve longer driving distances with EV and fuel cell vehicles, the smaller commercial trucks will need LRR tires first, according to Klimm of Falken tires. 

“Over time, as vehicle makers figure out the longer driving distance for larger trucks, LRR size groupings will then expand to supply more LRR tire options for the larger vehicles as well. Limitations currently in effect for driver work hours will not have the same impact with autonomous vehicles, possibly increasing travel hours in a day for trucks, putting a premium on tire life as well as the economy,” Klimm said.

The growth of autonomous trucks will also present challenges. 

“Perhaps the biggest challenge will be ensuring industry standards are in place for ‘smart’ tires. Like the automotive industry adopting AIAG back in the early 1990s to provide some commonality in vehicle standards, the trucking industry should consider something similar. For each OEM and tire manufacturer to develop their proprietary systems may have short-term benefits. Still, in the long run, it presents much complexity for fleets to be familiar with all the different methods,” said Schroeder of Cooper Tire.

As Goodyear looks to the future, it believes there will be growth in fleets, autonomous, connected, and electric (FACE) vehicles — all of which will likely impact truck tires.

“We anticipate higher load capacity for the same size tires as EV manufacturers look for ways to accommodate battery weight,” said Lancy of The Goodyear Tire & Rubber Co. “The rise of autonomous and connected vehicles will place significant importance on sensor technology and data-driven approaches to achieving consistent and predictable performance across various states of the tire lifecycle.”

Road infrastructure is also quickly developing around the globe, and Williams of Hankook Tire noted that new regulations are being created concerning the fast-changing driving environment.

“The industry will likely open to autonomous driving once infrastructure and regulations are set, and this will include the TBR industry, in which case trucks will be driving much longer than they used to. Tire endurance will become a significant factor. We predict that non-pneumatic tires will become more popular because of this,” Williams added.

As for autonomous trucks, Edgeley of Michelin doesn’t anticipate that autonomous trucks will become widely used until 2025, at least. 

“When autonomous trucks do become more widely used, we anticipate a balance in tire demand as more efficient driving and more regularly scheduled preventive maintenance will occur, offset by increased truck usage, as truck driver breaks will be less of a constraint to total ‘on the road’ driving time,” Edgeley said.