The Mexican aftermarket tire industry generated approximately $4.5 billion in retail-level revenue last year and is poised to keep growing at 7.4 percent annually over the next three to five years, according to a new analysis from Frost & Sullivan.
Revenue includes approximately $2.6 billion in sales of passenger car and light truck tires, plus $1.9 billion for medium and heavy-duty vehicles. The passenger vehicle segment will grow faster than medium and heavy-duty due to increasing consumer awareness of tire quality.
In 2014, distributors and installers sold approximately 22.7 million tires for passenger cars and light trucks, plus 3.2 million for medium and heavy-duty vehicles. Frost & Sullivan forecasts the tire aftermarket to grow to 31.8 million passenger car/light truck and 4.7 million commercial vehicle tires by 2019.
Strong local vehicle sales and a growing economy that has increased the size and purchasing power of Mexico’s middle class are the main drivers. In some areas of the country, roads are in poor condition, which in turn, increases tire replacement rates.
Luxury cars and light trucks are the fastest-growing passenger vehicle segments, contributing to larger wheel diameter tire sales, thus supporting price and revenue growth. In the heavy-duty segment, retread tires are growing in popularity and will make up 25 percent of the total by 2018.
There are approximately 100 brands present in the market today, including local brands, low-cost import brands, and premium brands. The top five brands are Bridgestone, Michelin, Continental, Goodyear and Pirelli, which hold more than 40 percent of the market share combined.
However, the industry will continue to be negatively affected by the entrance of used tires (both legal and illegal) that are estimated to reach around 2 million annually. A price-driven market, Mexico accepts used and very low quality tires from China, Korea and the United States in the commercial vehicle segment.
Despite all of the cheap imports, Mexico will soon become a net tire exporter, with major manufacturers investing in production facilities to quickly supply the fast-growing OEM market, meet local market demands, and sell into the United States and other neighboring countries. Currently, six different companies produce tires in Mexico.
The strong growth outlook for tires is just an example of the opportunities available in the Mexican automotive aftermarket.
Recent Frost & Sullivan analysis shows total light vehicles in operation is growing at a 2.1 percent annual rate, compared to 1.4 percent in the United States. Total manufacturer-level is growing by 4 percent annually, compared to less than 1 percent in the United States. Demand for batteries, brakes, filters and other aftermarket parts will increase steadily, reaching $8.4 billion by 2017.
Replacement rates remain lower than they should be. This is attributed to the fact that owners of older vehicles still tend to repair rather than replace failed parts. However, millions of new vehicle owners should offer the aftermarket industry an attractive growth market over the short to medium term.
Editor’s note: Stephen Spivey is the program manager for Frost & Sullivan’s Automotive & Transportation Global Aftermarket research practice. He focuses on monitoring and analyzing emerging trends, technologies and market behavior in the global automotive aftermarket. For more information on Frost & Sullivan’s Automotive & Transportation research, contact Clarissa Castaneda, corporate communications, at [email protected].
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