Discount Tire Will Acquire Tire Rack, This Could Be Good News for Consumers
Dec 23, 2021 · 4 min read
Discount Tire plans to acquire Tire Rack, and this might bring good news to consumers regarding the price of car tires. When a big name in an industry acquires another business, consumers aren't usually the ones to benefit from such a merger.
Many mergers result in higher costs for consumers, as competition becomes more scarce for giant companies, and it's often viewed as bad news for individuals and families. Need new tires due to a flat? If your insurance doesn't cover the costs, this merger may help lower tire prices soon.
Widespread supply shortages have raised the cost of tires
Consumers everywhere have noticed rising prices of everything from groceries to electronics, and tires have not been immune to such price surges.
The demand for rubber has grown steadily over the past couple of years, driving the price higher and higher, just like used and new car prices in general. Bloomberg reported that rubber prices had struck a four-year high last April.
Rubber is, of course, important for making tires, but several components within a car also require rubber. Paired with microchip shortages, it's no surprise that used and new car costs have gone as high as they have lately.
Thailand is the world's largest rubber exporter, and the country had almost no incentive to plant more rubber trees.
In the years before the pandemic, rubber prices were quite low, so rubber farmers simply tapped more trees to try to increase their family income.
This has culminated in a worldwide shortage, and manufacturers of all kinds are scrambling to order as much as they can. Some believe that the merger of two large tire companies could help tire prices, including both all-season and winter tires.
Could the merger make Discount Tire an even stronger company?
While there is no end to the rubber shortage and high tire costs predicted in the near future, the acquisition of Tire Rack by Discount Tire could help the company have more leverage when it comes to negotiating with rubber manufacturers, according to The Drive.
Larger companies have far more buying power than smaller ones, and they can often receive lower prices due to their large volume of purchases.
Now that Discount Tire will absorb Tire Rack, the company is likely to have more buying power with rubber manufacturers. Those potential savings could get passed onto consumers and car manufacturers as they build more cars to keep up with demand.
If Discount Tire is able to get more leverage and buying power, it will still probably take some time to see the impact from a consumer or manufacturer standpoint. Even still, hope that tire prices could go down because of this merger is welcome news for many.
Discount Tire predicts complimentary growth between companies
Both Discount Tire and Tire Rack are family-owned businesses that employ thousands of workers all over the country. Matt Edmonds, the executive president of Tire Rack, stated that "The only change we're going to see is growth," according to the South Bend Tribune. Edmonds added that, "The two businesses are complementary."
Tire Rack has mostly focused on distribution in its history as a company, as the business actually does not have any retail centers. Tire Rack did recently begin offering mobile installation through its ASAP Tire program, however.
Discount Tire, on the other hand, does have retail stores, so it will be interesting to see how exactly the two companies come together to serve their customers.
Both companies have put in plenty of effort to support their local communities too, including various hospitals, homeless centers, and other nonprofits. Since both entities seem to place a high value on giving, it seems likely that those efforts will only increase after the merger.