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ARC
How the Retreading Industry Can Face Up to
the Challenge of Budget New Tyres
A Presentation by the publisher of Retreading Business, given to the Asian Retread Conference in October 2016
There’s no denying that the challenge posed to the retreading industry by budget new tyres (primarily from China) is the biggest issue being faced by the industry today. Wherever we go in the world it’s what people want to talk about.
current situation a blip or is it the new reality? My view is it’s somewhere between the two. We’re currently at the bottom of a cycle caused to a large degree by overcapacity in China. However, the Chinese tyre manufacturers are not
Is the retread industry losing the race?
It has affected developed markets like North America and Europe, where there is a culture of retreading and an understanding of the role of retreading in the life cycle of the tyre, it has affected developing markets in Africa, Asia and the Middle East where there is less of a culture of tyre maintenance and where retreads are pitched largely as budget alternatives to new tyres, it has the potential to affect markets where budget imported tyres are excluded and it has even affected China’s own retreading market.
Now, I’m not going to spend too much time here analysing the effect of Chinese new tyres on the retread market. I think the retreading industry has spent far too much time navel gazing of late. It is my opinion that the retreading industry needs to stop whingeing about the state it is in, stop relying on government intervention to drag it out of the mire and focus on the two things it can do to counter the threat – produce better, more efficient, cost- effective products and market itself better, and I hope to be able to provide some focus in this article on some of the areas where the industry has achieved success recently, and how it can prepare itself for the future.
The first question to ask, however, is whether the retreading industry is lagging too far behind the Chinese in the race to get our tyres out into the market? In other words, is the
going to completely go away – they will continue to improve the quality of their products and become more efficient, and the retreading industry cannot afford to ignore them.
So, let us have a quick look at the current situation. If we think the retreading industry had a disastrous year in 2015, we are not the only sector to suffer by any stretch of the imagination. The Chinese tyre industry also had huge difficulties. Overall sales by Chinese tyre
manufacturers were down by 15.4%, and for 2016 the China Rubber Industry Association (CRIA) is forecasting a further 3.6% decrease in truck tyre production. As can be seen from the chart, of the top 10 Chinese tyre manufacturers, only Hangzhou Zhongce showed any growth at all, with many of the others posting double digit decreases.
With the prospect of further decreases and the undoubted impact that anti-dumping actions would have, particularly by the US – but by other major markets too, it appears that government policy in China is switching towards consolidation and to policies that will help the development of the larger, more professional players at the expense of the smaller operators. According to the CRIA the Chinese government
has plans to cut 40% of production by 2020 mainly by introducing stricter regulations in the areas of energy efficiency and environmental impact. The likelihood, therefore, is that we will see some kind of shake out in the Chinese industry, but it won’t be immediate.
Now before I go on, a few words about reliance on government intervention. It’s great if you can get it. There is little doubt that anti- dumping tariffs in the US have had an impact. There has been a big reduction in car tyre sales from China to North America and a similar effect is likely in truck should the action be ratified later this year. Other countries such as Russia and Brazil have also had government support. However, for every national retreading industry that has gained government support, there are plenty
16 Retreading Business
