Brand marketing, styles vital for replacement tires.

Aggressive brand marketing and development of new tire styles are vital for growth in the North American replacement tires aftermarket, according to analysis from Frost & Sullivan. The replacement tire market is said to be a very highly fragmented market, with restraints all around for the participants. Conversely, the market is offering growth opportunities to participants with a strong brand image and those who target specific customer groups. For others, brand image is very important, but the issue of efficient inventory management and lowering costs is proving itself to be the key to successful sales, according to Frost & Sullivan.

The analysis finds that the North American replacement tire aftermarket earned revenues of $14.4 billion in 2005, and estimates it to reach $19.1 billion in 2012.

In 2005, all-season tires had the largest share of unit shipments and revenues. All-season tires expect to continue to be the most prominent tire, but consumers in the northern states and Canada will still opt for snow tires in the winter season due to harsh weather and heavy ice and snow road conditions, according to the study.

High performance and ultra high performance tires are said to still be growing in terms of unit shipments and revenues. High performance tires' unit shipments may have slowed down, but it is still on a growing trend, according to Frost & Sullivan. Shares lost by high performance tires have been picked up by ultra high performance tires. Ultra high performance tires are expected to grow at a high rate in terms of unit shipments and revenues. Run-flat tires represent less than 1% of the industry revenues in 2005. Unit shipments are expected to increase by 50% annually, due to increased original equipment implementation of run-flat tires as original equipment, according to Frost & Sullivan.

In terms of rim diameter, 15" and 16" are still the most popular, but although the 16" category is still on the rising trend, the 15" category is expected to decrease, with the 17" category rising to its place. Before 2009, the 16" and 17" categories will have the highest share of unit shipments.

In North America today, automakers are equipping their new model vehicles with larger rims. This is mostly due to the fact that modern cars are equipped with bigger brakes and the trend to up-sizing with low profile tires remains strong. With wheels being one of the first customizations that an end-user goes through, tires naturally follow this trend. Because tires and wheels have become a performance upgrade, end-users' driving styles have changed as well. People accelerate faster and take sharper corners. This results in faster wear of tires, which results in faster replacement rates.

With the tire aftermarket participants having to comply with the TREAD Act, manufacturing costs are said to have increased, on top of the fact that raw material prices such as rubber and petroleum have skyrocketed, according to Frost & Sullivan. This is all said to result in price increases for the end-user. Unit shipments and revenues are expected to continue to rise at a steady rate during the forecast period of 2006-2012.

With oil prices at a historical peak, and the situation in the Middle East being so unstable, oil prices will not be coming down anytime soon, according to the study. With crude oil being one of the important materials used in manufacturing a tire, tire prices will increase steadily throughout the forecast period. Because of these reasons, consumers are expected to stretch the life of the tire as much as possible, disregarding manufacturer's safety guidelines. This in turn would slow down the replacement rate and decrease unit shipments, according to Frost & Sullivan.

For tire manufacturers, finding the right combination of demand and supply will generally guarantee strong revenue growth.