05/04/2011: What next for car tyres prices?

Whilst you might expect car tyres prices to be lower for tyres manufactured in the emerging Eastern economies and in particular those manufactured in China, this is not something you can easily take for granted. In fact the bad news is that car tyres prices for tyres imported from China by UK wholesalers are currently being affected by a number of supply and labour issues. What this means in effect is that wholesalers are bracing themselves for another round of price increases and, as you might expect, this will inevitably trickle down and affect car tyres prices in the retail market.

Strangely enough on the other side of the car tyres prices conundrum, it also appears that there are parts of China where manufacturers are over-producing to the extent that they are actually stockpiling tyres. The question is of course whether any of these stockpiled tyres are going to make it to the UK and if so will that have the effect of reducing car tyres prices? Well that’s a question where the jury is still out I’m afraid but in principle there is no reason why not, although this may be against the trend.

The current situation surrounding car tyres prices for Chinese imports is that whilst tyre exports from China are up, it is nevertheless a fact that increasing raw materials costs are squeezing profits hard which is bound to affect car tyres prices. In fact production costs amongst China's tyre makers surged nearly 30 per cent during 2009 while profits fell by 20 per cent. So in a nutshell, car tyres prices are currently being impacted by historically high raw material costs, extremely full production space and infrastructure issues such as limited access to electricity from the Chinese government.

And as if all this wasn’t bad enough news for car tyres prices in itself, it also appears that there are said to be a number of newer pressures in the personnel department, namely rising labour costs coupled with labour shortages. Meanwhile, in a bid to stave off otherwise investable rises in car tyres prices, Chinese tyremakers are being encouraged to strengthen innovation and reduce their production costs by using new materials and other methods of production.

The question is of course, will rising car tyres prices from China affect car tyres prices for tyres manufactured in the rest of the world? Confusingly perhaps it’s a bit of yes and no I’m afraid. All manufacturers are affected by raw materials prices and changes in labour costs, but Western and Japanese manufacturers in particular often carry a heavy research and development burden because of their innovative approach. At the same time, with retail markets still reeling from the recent recession there is still a strong possibility of heavy discounting which might reduce some car tyres prices.