Another record year for U.S. tire shipments?

The Rubber Manufacturers Association's (RMA) Tire Market Analysis Committee (TMAC) has reissued year 2000 shipment projections and industry forecasts for 2001/2002. The information confirms TMAC's March forecast that tire shipments for 2000 will match or surpass 1999's record levels, while growth for the next two years will moderate.

"We look forward to the likelihood of another record-setting year in the tire industry," said RMA President and CEO Donald B. Shea. "We owe this to the ninth year of economic expansion and the low inflation monetary policies instituted by the Federal Reserve."

Noting the minor volatility of tire shipment rates during the first quarter of 2000, the committee attributed this as a general reaction to the Federal Reserve's succession of interest rate hikes coupled with industry's promotional efforts and anticipated "Y2K" consequences.

TMAC cites the GDP and Industrial Production Index (IPI) as the basis for continued strong growth in tire shipments, where leading economists expect the GDP to grow by 4.9% in 2000 and then level off to nearly 3% for 2001 and 2002. Similarly, the IPI is anticipated to remain steady at a little more than 4% for this same period. Key projections for 2000 include:

* Original equipment passenger tires, which reached a record 61 million units in 1999, will add another 700+ thousand units in 2000 for a projected 61.7 million units as vehicle sales continue to grow. Decreases are expected for 2001 and 2002 as the economy slows.

* Original equipment light truck fires were one of the largest growth categories in 1999, reaching the 8.4 million units mark. Tire unit demand will plateau at this level in 2000 because of slowing light vehicle sales.

* Original equipment medium/wide-base truck tires will decrease by nearly 8% or 600,000 units in 2000 as vehicle sales slow through 2001, but are forecast to pick up again in 2002, at which point shipments will again approach the level achieved in 2000.

* Replacement passenger tires are expected to grow six million units to approximately 198 million units in 2000, or 3.2% over 1999's record 191.9 million units. This trend will continue into 2001 as more than 203 million tires are expected to be shipped - the first time shipments will breach the 200-million mark - and grow to 208 million units in 2002.

* Replacement "P-metric" light truck (LT) tires (a subset of passenger replacement tires with light truck appearance and tread characteristics usually found on sport utility vehicles [SUVs]) is anticipated to set the pace in 2000, where shipments are projected to grow by 22% over 1999's level to 22 million units, ultimately reaching 28 million units in 2002. Much of this record growth can be attributed to the record number of these vehicles on the road and the public's continued penchant to drive regardless of gasoline prices where, historically, it has been shown that supply, and not price, is the determining factor in a decrease in driving miles.

* Replacement light truck tires, or tires with a "LT" designation, will experience strong, steady growth for 2000 through 2002 as SUVs and light trucks increase in proportion to passenger vehicles in use. For this category, over 36 million units are expected to be shipped in 2000, a growth of 6.5% over 1999s levels, and will grow to 40 million units in 2002.

* Replacement medium/wide-base truck tires set a record in 1999 with 14.6 million units shipped. Another record is anticipated in 2000 as more then 15 million units are projected to be shipped for a 2.6% increase over 1999's levels. TMAC forecasts that this trend will continue through 2002, ultimately reaching 15.7 million units.

Overall, the combined auto and truck tire shipments for 2000 are projected to exceed 325 million units, up 2.8% from the record 316 million units in 1999, eventually reaching 337 million units at the end of 2002 - a net 21 million unit gain over the three-year period. Tire markets with projected higher-than-average industry growth rates for the 2000-2002 will be the combined light truck "LT" designation and P-metric replacement sectors averaging nearly 8% growth per year, as well as the "H/V/Z" speed-rated and the performance-rated passenger replacement tires growing at a forecasted 9.4% and 6.6% annual rate, respectively.

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