Analysis: Slump hits most, but not all, Chinese tire makers

Article from the annual ERJ China Tire Report 2016, published as a supplement in the July/August issue of European Rubber Journal magazine:

London – Given the well-documented impact of US tariffs on its exports and a domestic market slowdown, the China Rubber Industry Association (CRIA) figures show a surprisingly modest decline in sales of Chinese tire manufacturers in 2015.

At first glance, total sales for CRIA member companies listed were down by just 7 percent year-on-year to $21,489.8 million – compared to a total of $25,000 million for the 32 companies listed in 2014.

Company names missing from last year’s list are: Sichuan Haida Tyre Group Co. Ltd. which had 2014 sales of $414.5 million; Beijing Shouchang Tyre Co. Ltd, $123.0 million; and Good Friend Tyre Co. Ltd, $119.2 million.

Comparing figures for companies that appear in both this year’s and last year’s survey, the decline is a bit more marked, coming in 13 percent lower in 2015, according to sales data provided by the Chinese association.

Largest player

Zhongce-Rubber-Thailand-PattayaThe figures included a robust showing by China’s largest leading tire maker Hangzhou Zhongce Rubber Co. Ltd (ZC Rubber) which reported an increase of 1 percent to $3,074.8 million.

The performance by China’s largest tire maker and 10th largest worldwide, partly reflects its broad portfolio and progress in developing its brands.

ZC manufactures tires for cars, trucks, motorcycles, scooters, bicycles, tractors, ATVs and other vehicles, with brands including Chaoyang, Goodride and Westlake.

Hangzhou-based ZC has also made progress in supplying products in compliance with European standards, including the EU tire labelling scheme and REACH chemical safety regulations.

The CRIA data shows a sprinkling of gains elsewhere by other member companies, particularly among some of the smaller players, in the lower half of the table.

Indeed, the stand-out performance was by Weifang Yuelong Rubber group, which reported sales of $643.3 million in 2015 – an impressive 22-percent increase on its prior-year total.

According to the website of Yuelong’s subsidiary Kaixuan, last year the group’s three subsidiaries all had above 90 percent capacity utilisation rate. Yuelong was one of China’s top tire exporters with across-the-board growth for overseas sales.

But there were clearly more losers than winners in 2015, with double-digit decreases in sales recorded by most tire manufacturers listed in the CRIA figures. The biggest drop was recorded at Shandong Wanda Tyre Co. Ltd, where sales were down by 61 percent – ERJ was unable to ascertain factors behind this sharp decline from the company.

Linglong's factory in Thailand 600Other major names fared only slightly better, with Shandong Linglong Rubber Co. Ltd, Aeolus Tyre Co. Ltd, Prinx Chengshan (Shandong) Tire Co. and Shandong Sangong Tyre Co. Ltd all recording declines of 20 percent and above.

Aeolus, for instance, explained that its domestic revenue took an even sharper decline of 26 percent last year, compared with an 18.6 percent decrease for overseas revenue.

Meanwhile, Linglong’s prospectus cites “factors such as global economy and commodity prices” and a fire at its Thailand plant that caused damage to produced tire as reasons for the revenue drop in 2015 compared to the previous year.

For other Chinese tire manufacturers, the sudden market downturn and loss of business proved too much.

According to a CRIA official, tire makers that have closed in the past year include the operations of Capital Tire, Deruibo and Giti Chongqing, as well as Chuanghua Tire in Rizhao, Shandong and Fulltour in Linyi, Shandong.

Two other companies in Shandong province, HengYu and Huaqiao (aka Wosen Tires), were nearly closed down but have been acquired respectively by Doublestar and Hengfeng.