Tiremakers look to consolidate their positions with localization
International tiremakers are stepping up localization efforts to consolidate their lead in China, as the market is starting to show signs of recovery.
A survey by the China Rubber Industry Association of 41 major tiremakers showed that in the first three quarters of the year they produced 275 million tires, 5.58 percent growth year-on-year. The survey also showed that their sales revenue reached 110 billion yuan ($15.82 billion), a slight increase of 0.05 percent over the same period last year.
It is the first time that both tire production and sales revenue have seen positive growth since 2014.
This momentum is driven by the rapid growth of car sales in China, which has been the world’s largest auto market since 2009.
Statistics from the China Association of Automobile Ma nu f a c t u r e r s sh o w th a t nearly 25 million cars were sold in the first 11 months of 2016, more than the figure for the whole of 2015. The association forecasts another 3 million units of sales this month.
“If judged from current sales performance, I would say whole year growth will reach around 13 percent,” said Xu Haidong, an assistant to the CAAM’s secretary-general.
Consulting firm PricewaterhouseCoopers expects the growth rate to reach 14 percent by the end of the year, with the help of the tax policy introduced in late 2015, which halves the purchase tax for cars with engines no larger than 1.6 liters.
Industr y insiders believe market growth could slow down but remain steady in 2017, as the authorities have decided on a 25 percent dis- million count on the tax bill until the end of 2018, after the current policy expires at the end of December.
Localization drive
To be t t e r ta p in t o th e growing automotive market, international tiremakers are strengthening their localization strategies.
German tiremaker Continental Tires will double its local production to 14 million tires annually by 2019, with investments in capacity and high-tech projects totaling more than 2 billion euros ($2.08 billion).
T he company ’s plant, in Hefei, capital of East China’s Anhui province, opened in 2011, with its current annual capacity standing at 5 million units.
Its total investment in the plant has surpassed 500 million euros.
Continental Tires expects the plant to help extend its advantages in the Asia-Pacific and Chinese marke ts, and ultimately to double its sales volume to 10 billion euros by 2020.
“We see the A sia-Pacific region demonstrating huge potential and becoming a key driver of Continental Tires’ future growth,” said Nikolai Setzer, member of the executive board and head of Continental’s tire division.
The German tiremaker is tailoring products for local customers, with the launch of the Generation 6 products — UltraContact UC6 and ComfortContact CC6 — in September in Zhejiang province.
Yale Zhang, managing director of research firm Automotive Foresight, said Continental Tires is very likely to double its tire sales in the country by 2020, and that it is reasonable to set that goal thanks to its localization efforts and mature technologies.
In July, Continental Tires opened a training center, covering more than 2,000 square meters in Hefei Hi-tech Industry Development Zone, to its business partners and employees.
As the first such center in the Asia-Pacific region with 20 million yuan in investment, it is part of the company’s global strategy, as unified comprehensive training is one of the critical factors for Continental’s success, according to Setzer.
Continental Tires is not alone. On Nov 2, US tiremaker The Goodyear Tire & Rubber Co said it has broken ground on a $485 million expansion of its tire factory in Pulandian, Dalian, a coastal city in Northeast China.
It said that, when completed in 2020, the expansion will increase the plant’s capacity by about 5 million tires a year, enabling Goodyear to meet the strong and growing marke t demand for premium, large-rim-diameter consumer tires in China and the AsiaPacific region.
“T his investment in our Pulandian factory speaks to our long-term strategy of pursuing sustainable growth in the Asia-Pacific region and increasing Goodyear’s presence in high-value segments of the global tire market that are growing at rates above the total industry, where we can capture the value of our brand,” said Goodyear President and CEO Richard Kramer.
In ad d i t i o n t o lo c a l i z e d production, market research company J.D. Power suggests that tiremakers raise their brand awareness among car owners, which is quite low in China.
J.D. Power ’s 2016 sur vey shows that 57 percent of firsttime car buyers and 50 percent of non-first-time car buyers do not know the brand of their cars’ original tires.
Cai Ming, a senior manager a t th e co m p a ny, sa i d ti r e - makers should come up with more publicity campaigns, as increased brand awareness would improve customer loyalty. Statistics from the Ministry of Public Security show that China is now home to 172 million cars and the CAAM said China will surpass the US in 2020 by having 250 million cars on its roads.
If judged from current sales performance, I would say whole year growth will reach around 13 percent.” Xu Haidong, an assistant to the CAAM’s secretary-general tires were produced in China by 41 major tiremakers in the first three quarters of this year