As the world's largest tire producer, China's domestic brand tire companies are facing a crisis of overproduction. Since the United States tire “special security case” imposed a punitive tariff on Chinese tires exported to the United States, domestic tire brands that had previously relied heavily on exports have been hit hard, but at the same time, the production capacity of domestic tires has been increasing.

Statistics from the Guangzhou Customs show that from January to April this year, Guangdong's tire exports to the United States fell by 13.7%, and its share also fell from 39.1% last year to 29.7% this year. According to the "Eleventh Five-Year Plan" and forecast of the Rubber Industry Association, in 2010, China's total tire production will reach 700 million, an increase of about 7%.

About 40% of domestic tire brands are marketed abroad, especially the U.S. market, which accounts for a large proportion of the market. From a current point of view, serious export restrictions have not affected the expansion enthusiasm of domestic tire companies.

People in the industry believe that most domestic tire companies have expanded their production on a large scale and are eager to launch new tire projects. They are mainly optimistic about the prosperous domestic auto market. They hope to tap domestic demand and achieve a transformation from “outside to inside”. Obviously, this is not an easy task.

Export blocked

In September 2009, the U.S. government announced the implementation of a punitive tariff for cars and light trucks imported from China for a period of three years, that is, on the basis of the original tariff of 4%, 35% and 30% will be imposed in each of the three years. And 25% additional duties.

Immediately afterwards, the EU has also erected “environmental protection barriers” for tires made in China, and Argentina has also started anti-dumping of tires. So far, more than 10 countries have submitted anti-dumping and anti-subsidy investigations to Chinese tire exporters.

What makes domestic tire manufacturers even more impressed is that since the beginning of this year, the prices of raw materials, including natural rubber, have been rising. Natural rubber and natural iron ore prices have doubled.

Currently, 70% of China's natural rubber is imported, and its import tariff is as high as 20%. Since August last year, the average price of natural rubber imports in Guangdong has continued to rise, from US$1459.3 per ton to US$24,800 per ton in May this year. Although many companies have raised the prices of tires, they have not been able to keep up with the increase in the prices of rubber and other raw materials.

“In the cold and domestic hot car market in foreign countries, domestic tires have not changed from exports to domestic demand,” said Chang Yingzhi, a researcher in the chemical industry of China Investment Advisors.

According to statistics released by the National Bureau of Statistics of China, in the first quarter of this year, China's tire production was 164.44 million. According to customs statistics, China exported 80.22 million tires in the first quarter, and China’s tire exports accounted for 48% of total output. Great.

Accelerate production

Despite the dual pressures of export obstruction and rising costs, the production lines of domestic tire brand companies are still "overwhelming."

In 2009, Jinyu Tire Co., Ltd. had an annual output of 10.5 million sets of semi-steel radial tires, which were partially put into production; the Double Star Group launched an annual output of 1 million sets of all-steel radial tires; Shandong Linglong has an annual output of 12 million sets of high-performance passenger car radial tires, etc. Construction projects have also started; at the beginning of this year, China Strategic opened another 220,000 square meters factory in Xiasha.

According to data released by the National Bureau of Statistics of China, in May, domestic tire production was 74.16 million, an increase of 25% year-on-year, and an increase of 1.6% from the previous month. From January to May, total tire production was 31.23 million, an increase of 31% year-on-year.

Shen Jinrong, chairman of Hangzhou Zhongce Rubber Co., Ltd., said in an interview with reporters that at the beginning of this year, the market generally predicted that the world economy will continue to show signs of recovery in 2010. Therefore, each tire market is in a state of restocking. In this process, manufacturers will get a wrong signal that the market is very good, so most manufacturers take it for granted to accelerate production.

Cai Weimin, secretary general of the China Rubber Industry Association’s tire branch, has realized this: “In the first quarter, member companies’ exports accounted for only 39% of the output, which is still weak compared to the normal situation in the past. The increase in domestic tire market demand is limited. Large release of production capacity may create a situation in which supply exceeds demand."

At present, the price of the domestic brand tires, which originally depended on "price wars" to settle down, has already fallen to a greater extent. According to statistics, in May of this year, the prices of various types of heavy-duty trucks, light trucks, and sedans decreased by more than 15% from the previous month. Among them, the price of radial passenger car tires fell by nearly 30% from the previous month, and the radial truck tires fell by more than 15%.

Shen Jinrong said frankly, “If you sell tires at the current price of raw materials, and at the current price, the Chinese tire industry will suffer a total loss.”

Difficult turn

When the export was blocked, most domestic tire companies began to shift their strategic focus from abroad to China. However, it turns out that this kind of turning is difficult.

“In the field of cars, domestically produced brand tires have also been used on low-end models such as Xiali before, but now rarely see domestic brands of tires on cars. Most of the domestic brand tires can only be applied to trucks and trucks. "This is what Liang Quansheng, a former owner of a branded direct-run store owner, once converted from a domestic brand tire dealer.

At present, the domestic tire market has been dominated by foreign tire companies. In competition with foreign brands, the competitiveness of local tire brands is obviously weaker.

According to Ding Yuhua, chairman of the Tire Branch of the China Rubber Industry Association and chairman of the Triangle Group, this is at first attributed to the product itself. In general, the domestic brands of tire products are not of high grade, and their technical content and added value are relatively low. The competitiveness is obviously insufficient.

“Our products are mainly concentrated in the low-end market, while the high-end market is dominated by foreign brands. Take the car and light truck radial tires as an example. In 2009, the output of domestic car and light truck radial tires was about 240 million, of which foreign investment is about Accounted for 75%." Ding Yuhua said.

In addition, the “fighting price” phenomenon of Chinese tires in the international market is very serious. In the U.S. market, domestic brands sell for only 48 to 50 US dollars for the same specification of a car tire, while internationally renowned brands can sell for more than 170 US dollars.

Even if an international brand is doing OEM production in China, even though it comes from the same production line as the local brand, its price is still 50% higher than that of the local brand.

At present, foreign brands of tires have accounted for more than 80% of the domestic radial tire market, and the former state-owned key tire companies have already been merged with foreign capital by half, and they are still unable to avoid the “low end” doom.

Chang Yuzhi believes that because the domestic tire industry lacks in-depth research on the market, the entire sales process is basically assigned to the agents responsible for tracking, so the channel confusion, the frontline market is not timely follow up, the strength of the agents operating unevenly, The status quo of single sales promotion, and secondary dealers and direct fleet users who play a key supporting role in their sales, are not enough for development and control.

More importantly, in recent years, foreign tires have entered the domestic market in large numbers and have caused a huge impact on the domestic tire industry. In the past five years, foreign investment in the tire industry in China has increased by nearly 3 billion U.S. dollars. Investment quotas and development rates have exceeded the past. Any period. At present, there are a total of 30 factories in foreign brand companies with a production capacity of 150 million pieces.

For local tire companies with internal and diplomatic difficulties, it is still a long way to go to achieve a successful turn. Blind expansion is more like a trap that they have dug for themselves. At this moment, the alarm bell of overcapacity has already been knocked on.

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