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What’s going on with tyre prices?

We know, everything is going up. Prices are raging out of control for so many things and the world has gone a little crazy. Think about it for a second, a fancy bottle of water will set you back more than a litre of diesel. Diesel has doubled in price and milk is twice the price of diesel, despite coming from approximately 1.2 million kilometres closer. The morning bowl of cornflakes now costs about $126 and there’s an entire generation of children growing up who will consider cheese and capsicums a fine delicacy to be consumed only on special occasions. And then there’s tyres, what’s going on with them? Well, it’s a little like this…

Everything needed to make a tyre has gone up in price

Think the basic ingredients needed to make a Pav have gone up? That’s nothing compared to the ingredients needed for tyre production. Let’s start with the main ingredient; synthetic rubber. It’s made from petroleum byproducts so you can guess what’s happened to the price. It’s been rising as quickly as prices at the pump. In fact, the price of synthetic rubber has been rising steadily since July 2020. There’s no alternative to synthetic rubber either, tyres need it to provide grip.

Wait… what about natural rubber you ask? That’s seen a price rise too. Natural rubber comes from sources close to the equator. It’s not an area known to be a hub of commerce, meaning the natural rubber has to be transported to where the tyre factories are. That costs quite a bit, so ‘landing’ natural rubber for production is more expensive.

Then there’s Carbon Black. It’s as essential as salt on your fish and chips, and adding it to tyres was one of the most pivotal moments in tyre manufacturing history. It’s Carbon Black that gives tyres strength and durability. Without it, they would be weak and fall apart quicker than a <insert a rugby team you dislike here> scrum.

The issue with carbon black is it’s a manufactured material. Producing it requires oil to be burned. Oil has risen in price, as has the energy needed for the rest of the production process. As with synthetic rubber, this upwards trajectory started around July 2020. Then Russia decided to invade Ukraine in February 2022 and the increases became even steeper. Whilst the price of oil and energy both remain high, production costs for carbon black will be elevated.

Tyre production costs have risen

Having the ingredients is one thing but it’s another to actually use them. We might all have some eggs, flour and milk at home (especially just after pay day) but that doesn’t mean we can have our cake and eat it too. And making that cake just got more expensive.

This is the next problem for tyres. The price of the kitchen help has gone up, as has the bill for all of the appliances and the energy they use. Worldwide wage increases mean the international production process, regardless of location, applies considerable upward pressure on prices. Sure, good help is available… but it comes at an ever rising cost.

Then there’s the cost of having the burners on. Tyre production takes a decent whack of energy, as does just running a factory with lights, heating and everything else that’s needed. It doesn’t matter what energy is being used either, it’s all gone up. Energy from burning fossil fuels in China has risen, as has the cost of energy from sustainable sources. With tyres being manufactured all over the world, no tyre manufacturer is unaffected.

Getting the tyres to New Zealand

You’d have to be hiding on the other side of the world not to have noticed international shipping delays. Well… you might not actually be on the other side of the world. But you'll be in a queue waiting to get there. Only it’s a very long queue and the price goes up quicker than the queue shortens. These days, it would seem that getting from A to B requires a detour to Z. And a visit to the toll booths at B, C, D, E….

Yes, everything takes longer and costs more. Freight prices generally started rising at the same time as everything else, July 2020. The cost of a shipping container has increased approx. US$7500 since then. Say there’s 800 tyres in a container (sometimes there’s more, sometimes less) that makes it US$15 extra per tyre in freight costs alone. We should also note, it’s not just the shipping portion that is impacting prices. Transporting tyres to the ship and from the ship has also become more expensive.

Paying in US$

Over the last year the NZ Dollar has dropped significantly against the US Dollar. It was already low when compared to recent historical averages, and the exchange rate being unfriendly has a big effect. Those rising prices in buying the ingredients, mixing them and then transporting the finished product; they're nearly all charged in USD. A small slip of the NZ Dollar against the Greenback places considerable pressure on NZ pricing. So while we pay for tyres at the till in NZD, pretty much everything until that point is charged in USD. As inflation continues to cause issues and the US Government takes action to combat it, the knock on effect is a higher US Dollar and exchange issues for countries like… New Zealand.

Add all this up and you get a big increase in tyre prices. It’s an almost perfect storm of circumstance and it has led to a seemingly continual rise. Of course, what goes up must come down at some point so there will be a correction. It’s just that we don’t know when. For now, the best advice we can give is to ask about the quality of the tyres when you buy them. Tyres can vary in price significantly but better quality tyres will usually offer the best returns over their lifespan. More importantly, they’ll almost undoubtedly provide a safer driving experience for you and your family. If you’re in any doubt - we’re always here to answer any questions you may have.