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CHINESE TYRES
quality, indeed some have proven themselves as comparable to premium European-built truck tyres, and those higher quality
bottom on price.
So, the Chinese produce unknown, unverified volumes of tyres across all sectors. They
sound system, but then again, we may not want the monthly overheads.
How bad is the situation?
Let us look at the UK market as a worst-case scenario. In 2002 the UK imported 182,691 non-EU produced tyres, these accounted for around 12 per cent of the market. By 2016, that figure had risen to 540,000 units and accounted for 65 per cent of the market. Those imported tyres could have come from various sources – The USA, India, Turkey, Malaysia, Thailand, but by 2016, 98 per cent, let’s repeat that, ninety-eight per cent, of imported tyres came from China.
As the importation of tyres has increased, the production of retreads has declined in market after market. Good reputable business with quality retread products have closed down. Retreading Business had visited retreaders who offered a quality service, and who had invested heavily in plant and equipment, training and materials in an attempt to challenge the onslaught of cheap Chinese tyres, but many of them have now closed, or moved into other sectors.
What can be done?
For some years there has been a division in the industr y – some have joined the race to the
saving a few Euro that may be the only game in town. The other end of the scale is where we find the “quality will win” mantra, where producers believe that the economic arguments of producing and selling a premium product with a lower cost per kilometre will save the day. One only has to look at Pneu Laurent to see how that panned out for them.
There comes a time when there needs to be a levelling of the playing field and for BIPAVER and its members we are now past that time, and there is a strong belief that Europe needs to act to level the price competition. Even with lower production costs in China, it cannot be cost effective to bring tyres to Europe with the transport costs involved, and sell them at rock bottom prices. There has to be a way of levelling that field and creating a positive environment for Europe’s beleaguered recycling sector. Though we have to keep in mind that when speaking to Chinese retreaders, they too have a problem of cheap Chinese tyres. Of course, it is perhaps simplistic to blame all retreader closures on Chinese tyres. In some cases, retreaders failed to produce a basic quality, or to invest and as a result they failed to meet any market needs. Others were perhaps let down by their “partners”. Several retreaders have commented that after joining leading tyre manufacturer management schemes, they
tyres may be sold at an “off premium” price, but they can at least be retreaded.
The challenge comes from the flooding of the market with cheap tyres, across the sectors, that offer a price appeal at the point of purchase. These tyres, regardless of quality, are sold at prices that make cash starved operators an offer they cannot refuse. They are buying new Chinese tyres, regardless of quality, rather than a retread which may only be a few Euros cheaper, or perhaps even more expensive than the Chinese new tyre.
There are reasons that the Chinese new tyre is cheaper than a European, or indeed any country’s retread offer. The first is that production costs are lower – but let’s be clear on what we mean about production costs. There is the cost of the rubber and oil and steel, etc., these prices are fixed, give or take market fluctuations, on the global market, so the cost of raw materials to produce a tyre is pretty much fixed – there are exceptions, perhaps.
So, the cost difference is in the plant, machinery, investment, energy costs, and of course labour costs. The end product in China is going to cost less to produce than an equivalent new tyre produced in Germany, or France simply because capital costs are lower, and labour and energy costs are lower. However, it has been noted that when the quality of the end product is increased to European standards, the cost differential with the European made new tyre is not so great. All the major tyre manufacturers operate Chinese production facilities, but they do not get involved in a race to the
could, at one point, sell them anywhere in the world. However, as industries and governments saw the impact on their domestic markets, tariffs were imposed, and markets reduced or even closed to cheap Chinese tyres.
Back in China, production levels remained as before, increasing the volume of tyres available and leading to export initiatives from the Chinese government, that translate into subsidising the Chinese tyre sector, according to critics. If the critics are to
believed, then the Chinese government is subsidising dumping in export markets.
With demand down and supply as before, or increased, prices to the destination markets became such that for the small to medium enterprise, hard pressed for cash, the purchase of tyres to keep trucks on the road today, was a “no-brainer” if they could save a couple of hundred Euro today by purchasing Chinese tyres, then that was what they would do. No amount of logic or argument could persuade them otherwise, not the longer life expectancy of the retread, not the better cost per kilometre, not the reduced downtime from tyre failures, these were issues for tomorrow. And if we think about it, we nearly all do the same thing every time we make a larger purchase: Do we all buy a Bang and Olufsen sound system because it offers the best quality and will last a lifetime, or do we buy a cheaper brand that we may have to replace five years down the line? Most people buy cheaper brands because that is what they can afford at the point of purchase. Of course, we could take credit and buy the B&O
bottom, that is a particularly popular method of competition in the tyre sector. Everyone starts out with a fir price and the chao along the road undercuts, so, in order to retain business the first chap undercuts him in turn and we enter a spiral of falling prices and decimated margins until no-one is making any money – but if the customers are only interested in
received no fleet sales through the management system, and indeed some discovered that sales they previously had went to other retreaders. In some places volumes were simply not sufficient to meet the economic demands of a business.
The advance of tyre manufacturers in retreading has had an impact, centralisation by Goodyear and
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