Tire­mak­ers look to con­sol­i­date their po­si­tions with lo­cal­iza­tion

China Daily (Hong Kong) - - CHINA - By LI FUSHENG li­fusheng@chi­nadaily.com.cn

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


A worker checks tires at a pro­duc­tion line in He­fei, An­hui prov­ince. Global tire­mak­ers eye fur­ther on China as the mar­ket be­gins to re­cover.


Con­ti­nen­tal Tires has more than 70 BestDrive shops around China and the num­ber of im­age shops has reached 3,000.

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