Tire Prices Increase Due to Shortages
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Tire Prices Increase Due to Shortages

Photo by:   Unsplash, Obi Onyeador
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Alfonso Núñez By Alfonso Núñez | Journalist & Industry Analyst - Wed, 11/17/2021 - 15:41

Tire prices rose by 13.2 percent on average in Mexico and 18.5 percent in Nuevo Leon by the end of October, their highest rise in prices of the past 25 years, according to INEGI.

 

Industry experts point towards the continued global microchip shortage heavily affecting auto-parts manufacturing globally and causing up to 3-month long delays in the shipments as major causes for this price inflation. The shortage continues to greatly affect the Mexican automotive industry, lowering sales for new vehicles as production cannot meet the increased demand. The slump in sales for new vehicles directly affects the demand of tires, but not in the way one might expect.

 

“Whenever there is an unmet demand for new vehicles, it is natural for consumers to look for used vehicles of recent models and to renovate or change the tires, both of which cause an even higher rise in demand,” explains Armando Soto, Director, Kaso. INEGI’s latest report shows that tire manufacturing in Mexico is only at 91 percent of its capability, preventing manufacturers from meeting the product’s demand.

 

“As long as the semiconductor issue is not solved, it is possible that we will continue seeing rises in the prices of tires,” said Kaso. But beneath the infamous semiconductor crisis, there is an additional shortage in the auto-parts sector equally devastating the tire industry: scarcity of raw material for rubber.

 

Rubber producers were hit particularly when a leaf disease, the Neofuscicoccum ribis fungus, greatly affected the Hevea brasiliensis trees in Indonesia, one of the primary producers of rubber for tires; 90 percent of the world’s natural rubber comes from this region.

 

The COVID-19 pandemic also greatly impacted the tire industry as replacement tire sales dropped by 20 percent throughout 2020 due to nation-wide quarantines halting movement for months on end. Furthermore, several tile manufacturers such as Bridgestone, Michelin, Pirelli and Goodyear temporarily suspended production in Mexico due to the pandemic from late March until the end of May.

 

Throughout 2020, only 3.04 million tires were made, forming the worst crisis for the sector since a 28.3 percent contraction in 2009. The 20 percent drop throughout 2020 was on its way to reach 30 percent, but an increase in November and December sales allowed sellers to level out the losses. This year’s holiday shopping season might not be as fortunate due to the increased prices across the country.

Photo by:   Unsplash, Obi Onyeador

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