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CHINA
Marangoni Develops Chinese Market in Quest for Brighter Future
Marangoni Pilot plant at Songjiang district on the outskirts of Shanghai
Many Chinese retreaders are not following any kind of quality standard, which leads to a bad reputation of the whole industr y sector, also negatively affecting the few quality retread operations, which exist in the countr y.
In other parts of the world, high quality retreading is a well established and an integral part of total tyre life cycle management – proven by the fact that nearly all reputable new tyre manufacturers in the world have a retread programme and their fleet customers fully accept that high quality retreads have an even better CPK ratio than only new tyres alone, which they use to reduce their overall tyre expenditure, while being fully assured of the retreads high build quality, resulting from a generally well established, high quality retread production process.
“The Chinese market still seems to have a problem to understand that a quality retread is absolutely comparable to a good new tyre. Lower quality tread rubber is being sold at much cheaper prices, whereas we pay all kinds of duties for importing higher quality treads from Europe, making it rather difficult for us to compete on an even playing-field,” stated K alagin. Moreover, widespread overloading (in some cases as much as 100%+) is a major problem - Logistics companies have to weigh up the savings gained from transporting much higher loads than authorised on the country’s motoways, where they have to pay toll fees – compared to carrying less weight at the same costs and getting more kilometres from their tyres and possibly having a retreadable casing left after the new tyre life is finished – in the vast majority of cases, they favour the cost savings, coming from carr ying higher loads and don’t care about having to remove the tyres more often and not having retreadable casings when they are finished.
The Marangoni pilot shop has the capacity to retread 20,000 tyres annually but is currently only running at less than 50% of this capacity. “Unless there is a sufficient gap of at least 30 per cent difference between the price of new tyres and retreaded tyres, it is awfully difficult to convince fleet operators to buy a high-quality retread, rather than a cheap new tyre,” stressed K alagin. Ironically, Marangoni retreaded tyres are more expensive than some Chinese new tyres, but are claimed to give much better performance. “People find it hard to understand that the performance of our retreaded tyres is better than that of Chinese tyres,” he claims – but
Marangoni have conducted many comparison tests against many new tyres, produced in China (even ver y reputable ones) and have plenty of certified evidence to support their claims.
Due to some high profile accidents, involving Inter-City buses driving on motorways, the government has introduced new legislation in Sept. 2012, which now bans the use of retreaded tyres on bus fleets and vehicles moving with dangerous goods on highways. It is another setback for the growth of Marangoni as it had very much targeted both segments in China. “Ringtread is very popular in Europe and the US particularly in these two segments, where operators are looking for additional performance and safety features, but here we now can’t use it as the government has banned the usage of retreaded tyres on buses and DGV’s moving on some highways,” he regrets.
Interestingly, there are many companies who have shown interest in working with Marangoni in the recent past but the price remains a major factor. “People are keen to work with our retreading system, but the initial costs of the imported high-quality production equipment and rubber products are a high burden to overcome. If these costs are put against total mileages of the Marangoni Retreads, the CPK’s are generally so favourable that they completely justify the investment, but unless somebody takes the plunge and tries it for themselves, they won’t know.”
Marangoni is closely watching the evolving trend towards higher quality products in the consumer goods sector in China. “We hope this will eventually spill over to commercial goods and when that happens, we are well in place” he says.
Meanwhile, Marangoni is also exploring growth opportunities in other Asian markets. “We are exploring the more developed markets for retreading with high labour costs and a clear understanding of the concept of Cost Per Kilometre (CPK),” believes Kalagin. The company is looking at Asia as a potentially important market for its retreading systems, also because it already has longstanding Equipment supply relationships with a number of tyre companies in this region. This, the company believes, will be an added advantage for introducing a very high quality, independent retreading systems in these markets.
Marangoni Retreading Systems is investing time and money in transforming the Chinese market into accepting its hi-end retreading products and systems. The Italian company established an independently operated, modern retread pilot plant at Songjiang district on the outskirts of Shanghai in the summer of 2013, in order to be able to fully demonstrate its retread system to the local market. It seems the years of hard work in this historically low-end retreading market may bring some benefits in the future as there are signs that the market is beginning to show an interest in the company’s products. “It is too early to say when this market will really start accepting high quality retreading. We continue to make efforts to bring the market to the next level,” emphasised Martin Kalagin, Director Asian Operations, Marangoni Retreading Systems. He is responsible for refining the Marangoni operation in China and spreading it to other markets within Asia.
According to industry estimates, China’s truck/bus tyre market is round about 40 million units annually. However, the quality tyre market is significantly smaller at maybe 10 million units and, because
of extreme overloading, most of these quality new tyres don’t even make it to a second life and become suitable for premium quality retreading - the “Premium” retread market in China is probably less than 300,000 units per year. “In China, average quality tread rubber tends to cost around 15-17 RMB per kilo whereas the Marangoni product is in the range of RMB 25-45 RMB per kilo,” said Kalagin. Now the company has around 10 regular customers which are using Marangoni equipment and tread in China. The company’s clientele is mostly spread along the East Coast from Shenzhen in the South to Dalian in the North, with some further inland and even reaching as far as Inner Mongolia.
The company finds that many fleet operators in the Chinese market still do not understand the cost per kilometre concept (CPK) and make their tyre/retread purchasing decisions solely based on low initial purchase price – ignoring the otherwise universally accepted principle, that the real price of a tyre/retread can only be determined when the wheel is dismounted and the cost of the tyre (including all service costs) is divided by the kilometres it has travelled.
Martin Kalagin, Director Asian Operations, Marangoni Retreading Systems
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