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BULGARIA
This is a really big pie, a piece of which once belonged to the retreading plants. However, this is not the case anymore.
“It is a shame, but we have to admit that the Chinese tyres now have really good performance on the road. Their mileage is maybe only 20 per cent less, as compared to the retreaded tyre, but the price is much more attractive. We have many brands of Chinese tyres in our domestic market, including the cheapest ones, and you can forget about competition with them, because for the most common size the price per new Chinese tyre ranges between 155 – 160 Euros without VAT,” he estimated.
In this case, Ivanov emphasised the retreading company these days can survive only with importing and selling the Chinese tyres itself, at the same time doing its best to urge clients to not abandon retreading tyres completely. This is what Omnifak does, even if it is not truly happy with such “business diversification”.
“We sell Chinese tyres, but we are doing it without any pleasure. To be completely honest, we hate Chinese tyres. Nevertheless, we sell a minimum of 65 containers of
new Chinese tyres and this is much more than we retread. For the retreading industry this is a bad thing, because Chinese tyres are not always “retreadable”, especially when it comes to the cheap brands. We have been importing Westlake – a premium brand that is slightly more expensive - of around 5 containers per year, but in all cases, we agree to retread a Chinese tyre only when a client forces us to,” Ivanov said.
However, Omnifak believed that the supremacy of the Chinese tyres in Europe soon would come to its end, and it could happen already within the coming 1-2 years. The reason was the strong environmental concerns that were being raised, both in Europe and China. For instance, in Bulgaria, the inflow of Chinese tyres had resulted in more tyres being sent for incineration, so the negative impact to the nature was quite obvious, Ivanov noted. However, it was absolutely not comparable with what was going on in China. “I have visited these big cities in China, in Qingdao and Guangzhou, which could be described as the ‘cities of tyres’.
One tyre factory there stands right next to the other, and when you enter the city you have this specific rubber taste in your mouth. And, of course, the smell is omnipresent – a specific odour of tyres being manufactured or being burnt,” Leonardo Mueller, the commercial representative of Vipal in Bulgaria, added.
In 2017, China had already raised the ecological requirements that its tyre plants have to comply with, and it had already caused some temporary shutdown of some facilities and disruption in supplies to the foreign markets, Ivanov recalled. The factories would implement some adjustments and would restart the production cycle, but it was expected that the trend would gain momentum.
The ecological issues were attracting a lot of attention, so both the President and the leaders of Communist Party in China had entered the discussions about the new ecological standards, Ivanov added. It is quite possible that the need to adhere to principles of sustainable business would change the cost of the Chinese tyres at some point, and retreaders in Bulgaria hope that it would not
take from 5 to 10 years for them to see those changes.
Bailout package
Despite all the odds, Omnifak has not given up on retreading completely even though it is quite clear this segment of its business is not so profitable today as it once was. The company has tried several tools to see how the business could be slightly improved. In particular, Ivanov said he had been putting a lot of effort into promoting retreaded tyres among the customers, who wish to buy new Chinese tyres.
“I have such conversations with almost every customer that comes to me to buy some new Chinese tyre. I’m saying to him, that we could offer a retreaded tyre instead. It would have similar mileage, a slightly better price, and its use will be more environmentally friendly. However, as usual after 30-minutes of negotiations 10 per cent of customers agree to try retreaded tyres, while 90 per cent still opt for Chinese products, and there is nothing you can do about that”, Ivanov said.