Larry Edwards, an industry consultant in Charlotte, N.C., says service-related businesses that used to be considered sidelines, such as tire sales, are worth fighting over. Dealerships need other profit centers to make up for thinner margins on new-vehicle sales, he adds.
"Dealers' share of the tire business was practically nonexistent 15 years ago," Edwards said in an email. "Most dealers did not understand enough about the tire business to be proficient at buying and selling tires, so they simply referred [customers] to the local tire store."
New-vehicle dealerships accounted for about 8.5 percent of U.S. replacement tire sales in 2016, up from 1 percent in 2000, according to Modern Tire Dealer.
Edwards says automakers deserve credit for encouraging dealers to get into the tire business, and smoothing the way for dealers to buy tires conveniently from wholesalers such as Cleveland-based Dealer Tire LLC and American Tire Distributors in Huntersville, N.C.
But in recent years, Edwards says, dealer margins on tire sales have fallen, in part because automakers made it more expensive for dealers to honor "buy three, get one free" coupons.
"Up until the last couple of years, the manufacturers picked up the price of the free tire," Edwards says. "Once these programs started gaining traction, manufacturers started limiting their participation by only reimbursing dealers a portion of the cost for the free tire."
NADA's Scarpelli says dealers and manufacturers seek many of the same results.
"We love this business," he says. "The OEM and the dealer are going in the same direction. Of course we want to sell the most number of new cars possible, the most service, the most sets of tires possible." But he adds: "Sometimes there's a lack of communication and you get on different sides of things."