Photo via iStockphoto.com
Fleet Maintenance Tire Costs Remain Flat
Passenger car replacement tire pricing was flat in 2015 compared to 2014. A key reason for tire price stabilization was less volatility in prices for commodities used to manufacture them.
The cost of commodities used to manufacture tires continues to be the key cost lever driving the price of replacement tires for passenger cars.
“Raw material and transportation costs continue to be big drivers in this area. And, of course, the challenge is that both are outside of the control of our company and can fluctuate based on seasonality, regulations, and region of the country,” said Kevin Stephens, North American Sales Manager for Michelin North America.
In addition, there continues to be limited inventory for some replacement tires. “Several vehicle models have unique factory tire sizes with limited, if any, snow tire availability for at least 12 months,” said Frank Stracke, case manager, managed maintenance for Element, a fleet management business.
As auto manufacturers develop unique tire sizes for new-model vehicles, it impacts the replacement tire supplies for one to two years, as other aftermarket tire companies may not immediately meet the demand for these tire sizes. This lag time limits the selection and availability of replacement tires.
Larger Tire Diameters
The increase in OEM automobile wheel diameters has driven up the cost of fleet replacement tires. The question is, what does the industry foresee for wheel diameter sizes in the future?
“There is no doubt we will see a continuation of this trend. Think about it this way; consumers are demanding performance, not just from the vehicle itself, but all components that make up that vehicle. Part of getting that performance includes such things as larger tire sizes, which gives you larger brakes to be able to handle the performance needs of today’s vehicles and driving experience. It seems difficult to have one, without the other,” said Stephens of Michelin North America.
Another factor influencing tire availability in the aftermarket is existing purchasing agreements between auto OEMs and tire OEMs. “The challenge is determining which OEMs have signed tire company agreements for unique tire brands and sizes, as this can impact a fleet’s vehicle selector list,” said Stracke of Element.
Another factor influencing the spread of larger diameter tires within fleets are driver-paid options.
“Driver-paid options allowing different trim levels have resulted in moving to larger wheel diameters, which are more expensive and challenging to replace,” said Stracke.
Forecast for Tire Expenses
The forecast is that tire expenses will increase in the 2016 calendar-year.
“We foresee a 2- to 3-percent increase in replacement tire pricing driven by unique tire sizes, run-flats, and limited availability for certain vehicles. This commonly occurs with the continued introduction of new tire models and sizes. Like-for-like replacement tire pricing should remain flat. Vehicle selection and options will be very important in determining future tire replacement costs,” said Stracke.
Seasonality is also a factor in replacement tire pricing, especially with snow tires, which result in product shortages with the onset of severe weather conditions.
The wildcard continues to be the price of the key commodities used to manufacture tires, in particular, the price of oil. The key to future tire prices is the price of oil, but the near-term outlook appears to be that pricing will remain stable.
Tire Company Innovations
One factor exerting downward pressure on total fleet tire expenditures is the ongoing improvement in tire quality, which has resulted in longer wear life during the past decade. Tire life has been extended by 10 percent in the past 10 years. This has helped offset some of the recent price increases since the expense is spread out for a longer period.
In addition, there are a number of manufacturing innovations that are being explored/implemented by tire OEMs to reduce costs and the impact on wear.
“Self-seal technology has a unique rubber compound that plugs holes in the tread that has been punctured. There is a thin layer of rubber compound, composed of natural rubber. The compound surrounds the area and the object causing the protrusion, keeping air from escaping and the tire pressure at its previous level,” said Stephens of Michelin North America.
by Mike Antich
FLEET MANAGEMENT AUDIT
Fleet management is the use of a set of vehicles in order to provide services to a third-party, or to perform a task for our organization, in the most efficient and productive manner with a determined level of service and cost.
Fleet management activities are shown in the following graph 1:
Graph 1: fleet management activities
The proposal audit analyses and assesses all fleet management activities shown in the graph 1, and its main goals are:
- Know the overall status of the fleet management activities
- Provide the analysis, the assessment, the advice, the suggestions and the actions to take in order to cut costs and increase the efficiency and efficacy of the fleet management activities
With the information obtained, we’ll elaborate a report that holds the overall status of the fleet management as well as the suggestions, recommendations and the measures to take in order to cut costs and optimize the fleet management activities.
CLICK ON THE FOLLOWING LINK TO DOWNLOAD THE PROPOSED FLEET MANAGEMENT AUDIT:
José Miguel Fernández Gómez
I´m a Fleet Management expert, and the manager of Advanced Fleet Management Consulting, that provides Fleet Management Consultancy Services.