Tyre demand in China is booming

ERJ staff report (DS)

Beijing, China -- Frbiz.com, one of China's B2B search platforms, reports that tyre industry demand is booming.

In 2010, China's total tyre production volume will reach about 700 million tons; indicating faster than usual growth. Frbiz is expected that in the next five years, the average annual growth rate of the tyre industry will be about 10% - 15%. Analysts believe that with the support of strong demand, tyre sales will stay relatively high, leading to fairly certain profits.

Frbiz pointed out that demand in the tyre industry stems mainly from two aspects: first, in 2009, the number of motor vehicles reached 186 million, of which 76 million were automobiles, which means that the future maintenance market in the tyre industry is huge. Furthermore, China is now an auto superpower; from the growth in demand, it appears that in the next two years a growth rate of 15 percent - 20 percent can be maintained. Besides the automotive industry, the machinery industry will also be a market for rubber tyres, accounting for about 10 percent of demand. Frbiz expects that the future of the construction machinery industry is still expected to maintain a three-year 15% compound annual growth rate, which will boost the construction machinery industry's demand for tyres.

FRBiz notes that share valuations do not necessarily reflect the state of the business. the current industry average P/E and P/B ratios are 17 times and 4 times normal levels, respectively; from a relative valuation perspective, Frbiz suggests that analysts pay more attention to tyre industry raw material prices and demand growth changes.

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Press release from FRBiz