Loss of serious tire industry urgent need to break through

In the past two years, the tire industry in China has been at a low point, and a number of data have continued to decline. Many companies struggling to support them have entered the ranks of the loss-making army. The further expansion of the loss amount and loss area indicates that the glory of the Chinese tire industry has abruptly ended. . Factors such as overcapacity, low technological content, and continued sluggish domestic and international environment have brought an unprecedented blow to the Chinese tire industry.

The difficulties of the tire industry can be seen from a set of data. Recently, the China Rubber Industry Association announced a set of figures, statistics show that from January to May, accounting for the statistical enterprise tire production fell by 8.27%, finished product inventory (value) rose by 11.4%, sales revenue decreased by 14.32%, to achieve Profit decreased by 32.51%. Among the 42 statistical enterprises, the loss amounted to 436 million yuan, an increase of 171%, of which the loss of domestic-funded enterprises was 39,051 million yuan, an increase of 199.52%.

With the "General Technical Specification for Composite Rubber" formally implemented on July 1, China has proposed a new standard for the concept of composite rubber, which stipulates that the raw rubber content should not exceed 88%. Prior to this, the rubber compound content of the rubber was 95% to 99.5%, and it enjoyed zero tariff for a long period of time. The formal implementation of the new regulations undoubtedly aggravated the difficulties of tire companies that had experienced difficulties, and Chinese tire companies fell into the trap of internal difficulties.

Overcapacity lacks economies of scale

If we look at the relevant industries, China’s auto production is at a steady growth stage, coupled with the drop in natural rubber prices, the prospects for Chinese tire companies should have been bright. Due to the interests, many tire companies have invested blindly without investigating market research, resulting in continuous increase in production capacity. From the previous supply shortage to overcapacity, the decline in demand has resulted in a decrease in the operating rate of tire companies. Prices have also continued to fall, thus shrinking profits.

“The main reason that led to the decline in the profits of domestic tire companies is overcapacity. Based on this situation, companies have to reduce sales prices in order to seize the market, resulting in a decline in profits.” Zhu Yun, tire analyst, said.

According to quarterly reports released by listed tire companies, revenues and profits of tire companies, including Aeolus, Double Money, Goodyear, and Hankook, have both declined significantly year-on-year. According to industry sources, the traditional tire industry has low barriers to entry, low investment costs, coupled with poor market information communication channels, blind investment phenomenon is relatively common, the industry's low level of repeated investment status is serious, and the tire industry has excess product structure.

Some local governments, in pursuit of outstanding achievements, are pursuing the expansion of the tire industry, ignoring the actual bearing capacity of market capacity, and even lowering the barriers to entry into tire companies, thus contributing to the investment boom in backward tire production.

Jiang Yun told the media that after 2010, domestic tire companies have reached saturation. By 2012, the problem of overcapacity began to appear. Today, the structural excess capacity of tires is even more serious.

The media has learned that there are more than 300 large and medium-sized tire companies in China, which are not standardized, and there are even more unregistered small enterprises. The industry’s production capacity is far greater than the demand. Taking the all-steel radial truck tires as an example, the current annual production capacity is about 130 million sets, but the market demand is only 80 million units, and the market's production and demand are upside down.

Lack of technical content of products is also one of the reasons for the decline in sales. According to statistics, about 65% of domestic radial tires and light truck radial tires are currently mid- to low-end products. The common problems of these products are low technical performance, serious homogeneity, and fierce market competition.

Due to the low technical content, it is difficult for China's low-end products to enter the international market. Even if they go abroad, it is difficult to compete with other international brands for market share, making the development of sales channels for Chinese tire companies obstructed. At the same time, many foreign tire manufacturers have set up factories in China, further eroding the already few domestic markets.

Recently, it was reported that the second phase of the Hankook Tire Chongqing plant (car tires for passenger cars) was put into operation. The second phase of the production will add 6 million new production capacity, which will bring the total production capacity of Hankook Tire in Chongqing in 2015 closer to 7 million. This also means that Hankook Tire has further increased its presence in China.

Frosted tire companies are struggling

As a result, China’s tire companies are struggling with the current stage of development. Another issue that cannot be ignored is the adjustment of national policies. This will also have a significant impact on domestic tire companies to a certain extent, which may cause the industry to face a new round of reshuffling.

A senior rubber analyst revealed to the media that the "General Technical Specification for Composite Rubber" formally implemented on July 1st this year is really worse for Chinese tire companies whose profit margins are declining year by year.

It is reported that the most noticeable aspect of this standard is that the content of raw rubber in compound rubber should not exceed 88%. In other words, compound rubber that has been blended with more than 12% of additives added in the country of origin will not be used in domestic tire factories. Therefore, after the new standard is formally implemented on July 1, 2015, the use and import volume of compound rubber will become less and less.

The media has learned that compound rubber is a product of the domestic tire industry to circumvent the import tariff of natural rubber. It is a mixture of traces of stearic acid and other additives. Its physical and chemical properties and price are basically the same as natural rubber, and it has been widely used in the domestic tire manufacturing industry for 15 years. The implementation of the new standard means that the traditional compound rubber with only trace additives added will be regarded as natural rubber. This policy basically cuts off the feasibility of the compound rubber method.

Since the natural rubber raw materials required by the Chinese rubber industry cannot be self-sufficient, 80% are dependent on imports. Imported natural rubber needed by domestic tire manufacturers to export tires can be used to write off customs duties, which means that if domestic tires require the use of imported natural rubber, they must pay customs duties.

According to the new tariff plan for 2015, the tariffs on imported smoke film and standard natural rubber have been increased from 1200 yuan/ton to 1,500 yuan/ton. This would mean that if the compounding glue cannot be produced and imported in accordance with the “88% raw rubber 12% non-gel component” new formula, then the current 97% and 99% natural rubber content of the compound glue will be considered as the original glue, and Paying an import tariff of 1,500/ton, the impact on the market is undoubtedly enormous.

A regional manager of a tire company in the country said in an interview with the media that the adjustment of compound rubber standards is not just an impact on the rubber industry. For domestic tire companies, the impact can not be ignored.

In recent years, the tire industry has overcapacity, and companies have to reduce sales prices in order to seize the market. Profits are already low. Now that the standard of compound rubber has been adjusted, it directly leads to an increase in the cost of the product.

In the face of products that are not profitable, cost increases can only increase sales prices. Consumers do not care about the reasons for the price increase in the tire industry, so the rise in product prices is not accepted, so it is difficult to increase the sales price of products. This is tantamount to calling domestic tire companies to do a “multiple choice” issue, or increase sales prices, which will inevitably cause sales to decline, and if it does not increase sales prices, it may face embarrassment of losing money and making profits. Whichever outcome is China Tire companies do not want to see.

Big group strategy will become the only way out

On the predicament of the domestic tire industry, Jiang Yun said that it is recommended that companies deal with the problem of overcapacity in the industry through strong alliances or mergers and reorganizations. As China's tire industry grows late, in some respects it appears to be eager for quick success. Tire manufacturing technology can only be considered low-end, and there is still a big gap compared with well-known tire manufacturers in some developed countries.

If companies can combine or merge and restructure, they can achieve complementary advantages, optimize resource allocation, and concentrate funds on product research and development, thereby expanding market share and gaining greater economic benefits. At the same time, it can also improve the company's international competitiveness and promote the development of China's national industry. If you blindly reduce the sales price of your products, you will only make your profits lower and lower.

Deng Yaxi, president of China Rubber Industry Association, pointed out that it actively implements mergers and reorganizations, optimizes the industrial organization structure, develops a group of independent intellectual property rights, and has a major advantage in the main industry by strengthening the main industry, resource integration, business process reengineering, and capital operation. Companies, large corporations, improving corporate competitiveness and resource allocation efficiency, and making sound brands are important choices for the Chinese rubber industry to become bigger and stronger.

Deng Yaxi said that the establishment of Tire Group is conducive to the improvement of production efficiency, is conducive to increasing investment in science and technology, is conducive to the construction of well-known brands, is conducive to the unified procurement of raw materials, is conducive to the unity of product sales network, is conducive to tire companies The implementation of the "going out" strategy. Enterprises must have a qualitative leap, and they must join forces to set up enterprise groups, which can be a combination of tire companies. They can also be based on geographical distribution, product division of labor and other mergers and acquisitions, and can also be tire companies and upstream and downstream enterprises. In short, to narrow the gap with the world's tire multinational corporations, we must first promote the development of China Tire Group.

As for the implementation of the new standard, a senior rubber analyst disclosed to the media that the production of rubber from compounded rubber to standard rubber was not so difficult. With the adjustment of policies, most compound rubber processing plants will choose to switch to standard rubber. Therefore, the standard rubber production will be more than composite rubber. Of course, some large-scale processing plants have jointly developed new standard adhesives for large-scale production by cooperating with Chinese tire companies. However, most small and medium-sized processing plants have chosen to convert to lower standard rubbers with relatively low risks.

Although a considerable number of people in the industry strongly opposed the implementation of the new standard, the analyst made different opinions. He said that with the rapid development of China's rubber industry, the production of compound rubber will gradually take shape, and a group of professional production enterprises will emerge.

Due to the uneven quality of composite rubber, market behavior is not standardized. It is necessary for the government to formulate a "Common Rubber General Technical Specification" to ensure the quality of products, regulate market behavior, and ensure the fairness of trade. In the long-term interest, it is beneficial and harmless.


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