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The Honolulu Advertiser
Posted on: Sunday, October 29, 2006

Competition tightens tire market

By Kim Hart
Washington Post

WASHINGTON The tagline on the back of the truck is what catches people's attention: "Notice: Driver carries no old magazines or burnt coffee."

For David Leslie and Pat Garvey, co-founders of TireVan, a suburban mobile tire installation service, the disclaimer epitomizes the experience of replacing automobile tires in a traditional service center. The long wait, the limited selection and high price of tires drove the two entrepreneurs to start the business centered around convenience.

"We couldn't figure out why this hadn't been done before it seemed like such an obvious business opportunity," said Leslie, who got the idea when he searched for a similar service to change his tires.

TireVan is one of the latest entrants in an increasingly fragmented tire market. Competition has intensified as independent dealers, the traditional market leaders, are being squeezed by the growing popularity of online discounters and superstores.

That competition has intensified as the demand for tires has waned in recent months. September marked the 10th straight month demand has declined, with national shipments of tires falling 3.5 percent from the same period a year ago, the Rubber Manufacturers Association said.

Tires are more durable and last longer these days, prompting some decline in sales. High gasoline prices may also be leading some people to drive less.

A jump in tire prices, mostly because of expensive rubber and synthetic materials, has created an opportunity for big, national retailers and Internet outlets to undercut traditional dealers. And they have been helped by certain tire manufacturers, who have reduced their supply to small independent tire dealers while increasing their supply to wholesalers, who focus on selling tires to mass merchandisers.

The shift has led some national tire chains to consolidate stores and prompted independently owned dealers to merge with one another to offer a wider variety of services, according to research firm IBISWorld Inc.

For now, independent dealers remain the dominant sellers, accounting for 69 percent of the passenger market, the Rubber Manufacturers Association said. But mass merchandisers have captured 17 percent of the market and manufacturer outlets claim 10 percent. Internet sales make up about 4 percent.

As drivers replace tires less frequently in the future, some dealers may find it harder to form relationships with customers, who may be tempted to look online or elsewhere to find good deals, said Skip Potter, executive director of the Chesapeake Automotive Business Association. And if particular models and brands are not available in the local neighborhood shop, consumers might take their business elsewhere.