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CHINESE TYRES
is really lacking. Also, insiders’ views on how to creatively and effectively go to that specific market will be of great importance.
RB: Will the larger players now look to produce more tyres for Europe in plants outside China (i.e. in SE Asia etc.)
SL: Globalisation is always part of long term plan, not just for Chinese manufacturers. It is part of the life cycle of any business. Which tier 1 manufacturers do not have factories around the world? South East Asia is definitely a hot area for investment now. The main reasons are not because of trade
wars, but the internal changes in China. Increase in labour and transportation costs, environmental concerns and global manufacturing capability to satisfy different markets are all considerations.
RB: How do Chinese manufacturers view the future of the Chinese tyre industry in the light of the introduction of tariffs in many markets?
SL: Actually, the US have put anti-dumping and anti-subsidy tariffs on Chinese tyres since 2009. In the meantime, the US has still been the biggest export country during those years.
During the same period, Chinese manufacturers have increased market share in Europe, India, and other markets, and the whole industry keeps growing. The current political situation in US has made tariffs become a hot topic again. One worr y is that other countries will follow the US. And I think all manufacturers kind of get all those signals to remind themselves to focus to move toward high technology and quality products, to build a global brand, to diversify productions into key markets, and to move from a “low price” to “high value” value proposition.
RB: Do they expect there to be consolidation in the Chinese industry as a result? Would they welcome that?
SL: China has over 600 tyre manufacturers, it makes for a ver y competitive market. Also, there is an excess capacity in middle and low grade radial tyre products, so manufacturers can only compete on price. Furthermore, as the central government is focused on high quality developments and the environmental, internal consolidation already happening, it is just part of the process and is inevitable. The tyre industr y in the west is pretty much 160 years old, so it is already more consolidated.
RB: Europe and other global markets feel many Chinese manufacturers have been posing unfair competition. What is the way forward for the Chinese tyre industry in the future?
SL: The “unfair” part was coming from the low labour cost, low environment concern, and government support in the past. All those are pretty much going away and you can see the existence of investment toward South-East Asia. The “unfair” part is getting less, and even recently in March the US reduced the tariffs on both anti-dumping and countervailing on Chinese tyres. One tail wind that Chinese manufacturers have is that China actually is the biggest tyre market now, and it is still growing at a fast pace. It really helps Chinese manufacturers in term of the scale of production, which help them to drive the cost down. With the government’s focus on high tech both on products and automated manufacturing technologies, this will help Chinese manufacturers in term of competitiveness. Also, the one belt on road initiative and its related infrastructure plan will definitely drive the demand in tyres in those new emerging markets.
CITExpo is the biggest Tyre and Wheel trade show in Asia. It takes place in Shanghai, China on August 20 to 22 this year.
