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Why tire prices are on the rise

Talk about inflation. Tire prices are on the rise, and a lot of consumers aren’t going to be very happy. In fact, tire industry analysts like Saul Ludwig predict that the prices of wholesale tires will be 5-10% higher by the time the new year rolls around. But why?

There are a few factors that are contributing to the rise in prices. First off, raw materials like rubber and oil are also rising in price, forcing manufacturers to charge more in order to maintain profit margins.  Secondly, supplies are low as manufacturers remain cautious in the recessed global economy, and demand is high at a time when lots of consumers are in the market for snow tires. Simple Economics 101 tells you that low supply and high demand equals higher prices. Another contributing factor is the Chinese tire tariff recently imposed by President Obama. In light of the tariff, many manufacturers are raising prices in order to offset the hefty 35% tax.

Goodyear was the first major tire manufacturer to announce a price hike. Starting December 1st, all Goodyear replacement tires sold in the U.S. will be subject to a 6% price increase. Cooper Tire has also increased its prices to offset the tire tariff. Industry analysts expect that the rising cost of raw materials will result in a 5-10% increase for Cooper across its lineup in 2010.

Despite the surge of buying, tire shipments are still expected to drop in 2010, as the tire industry continues to suffer the effects from a hard hit automotive industry.

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