The factors that explain why the price of tires shot up 500% in two years

Currently it is difficult to get car covers for less than $30,000 a unit

The market for tires for private vehicles, utility vehicles for agricultural and mining use, and also for freight transport is currently experiencing a situation of stress similar to the one that generated fuel shortages in winter. A combination of international factors and barriers to imports have triggered prices in the local market since the end of the Covid-19 pandemic. And, to this panorama was added in the last 4 months a conflict in the three local production plants which maintains manufacturing at around 40% of installed capacity.

The bottleneck began to be created at the end of the health crisis. This is shown by data from the Regional Center for Economic Studies of Bahía Blanca (Creeba), which in its very comprehensive regional price index follows data on tire values ​​at distributors in its area of ​​influence. Until November 2020, as pandemic restrictions began to ease around the world and economic activity rebounded, supply was unable to keep up with accelerating demand growth.

“The data we have shows that between 2010 and November 2020 the average price for a generic tire was around USD 70 per unitat the official exchange rate,” he said. Gonzalo Seed of Creeba.

Since then, the difficulties of international trade, the closed ports, the months without activity made me begin to notice the shortage and since then they have never stopped rising.

“For July of this year, always at the official exchange rate, that price went to USD 307 in our survey. The regulation of imports, and more recently, the labor conflict in the sector also helped the trend”, said Semilla.

Since the exit of the pandemic to these days, tire prices surveyed by Creeba rose 300% in official dollar terms. If the increase is measured in pesos, the variation climbs to 542 percent.

Between 2010 and November 2020, the average price for a generic tire was around USD 70. As of July this year it was USD 307 (Seed)

The bottleneck is not new, but it is getting narrower. The strict regulations that Productive Development and the Central Bank impose to be able to pay for imports it has its role in the shortages that, in the face of competition for this essential input for transportation, agricultural machinery and even private cars, are transformed into skyrocketing prices.

According to industry data, the 60% of the local private vehicle tire market is dominated by imported casings. Y in transport, trucks, that portion amounts to 80 percent.

“We are in such a situation of scarcity that large buyers are unable to obtain enough units to cover the quota they have agreed with distributors,” he said. Martin Borbea AnteloPresident of the First Association of Automotive Freight Transport Entrepreneurs (Paetac).

To the global problems and the obstacles to imports was added this year the union conflict in the three local plants.
To the global problems and the obstacles to imports was added this year the union conflict in the three local plants.

“A basic tire for a semi, which changes between 18 and 22 tires per semester, hovered for years the USD 300 and now you can’t get it for less than USD 1,000″ said the business leader.

None are under $200,000, some $730 at a parallel exchange rate and almost $1,500 per unit to the official dollar.

In transportation, the strategy of fleet owners is stretching the useful life of available tires. With up to two “retreads” – a method of renewing the outer tread – for the best quality tires. But the cost is still passed on, either through freight rates or through security.

Today we do not have stopped trucks, as if it happened with the lack of diesel, but the lower availability of tires translates into prices (Borbea Antelo)

“Today we do not have stopped trucks, as if it happened with the lack of diesel, but the lower availability of tires is transferred to prices and, with the transport rate, to all the prices of the economy. And the other cost that no one is measuring is security: we are working with higher levels of risk because there is no alternative,” said Borbea Antelo.

The shortages also came to concern automakers, who are among the main consumers to equip their new vehicles. The shortage did not hit them squarely, because they managed to negotiate with the Economy and the Central Bank access to imports with which to cover their needs. The authorizations -”SIMI”, for the comprehensive import monitoring system- granted by the industry, both for tires and for any other necessary auto parts, were granted before the production lines stopped.

Local production, meanwhile, says it does not suffer from lack of inputs since they are receiving free passage through customs in the sector. But in one of the factories they complained about the conflict that already exceeds 120 days with the Single Union of Tire Workers (SUTNA)and that resulted in blockages in the three producers -Pirelli, Fate and Bridgestone- that this week led to stoppages for three days for some shifts.

The local industry provides mostly pickup covers with some production for private cars.. Also, a smaller proportion of truck tire supply. It works with a complementary logic with Brazilian producers, more oriented to car tires than to the local market.

They are not being able to import the necessary tires and the blockades on local plants have been going on since May (Di Pace)

With the Central Bank counting every dollar that goes out, going out to replace the humble tires on a family car can be particularly onerous. It is difficult to find covers below $30,000 a unit, and that in the cheapest models. If it is special models, the values ​​can be fired multiple times.

“It is not possible to import the necessary tires and the blockades on local plants have been going on since May, which means that it cannot be aspired to replace them with local production,” he said. Damian DiPace of FocusMarket.

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