While the largest Chinese players do operate at levels comparable to Western tire makers, the industry still carries a tail of 300 or more much smaller manufacturers supplying mostly cheap, hard wearing tires for the domestic market.
Even the biggest Chinese producers lack the scale, experience, expertise and financial muscle to compete at the top end of the global tire market, especially in the areas of research, product development, tire-testing and branding.
Chin’s tire industry is, therefore, heavily dependent on export markets, where it must, by and large, competes on cost – being unable to command the higher prices needed to support any added-value within its tires. And, as if to add insult to injury, the Chinese also lose out in their own lucrative domestic OE tire market to stronger Western brands.
Given these deficiencies, any significant drop in sales to its largest export market, the US, was always going to hurt. The country was the destination for 31 percent, by volume, of Chinese car tire exports and up to 60 percent of its truck & bus tires sold overseas.
Since the US slapped import duties on Chinese car tires, sales of the top 10 Chinese tire makers fell by around 18 percent in 2015 compared to the previous year. Meanwhile, at least five Chinese tire makers were reported to have gone bankrupt and sales among a top tier of Chinese tire machinery makers slumped by around 30 percent, ERJ figures also show.
Indeed, last year, the value of Chinese car tire and truck & bus tire exports worldwide fell by 19.2 percent and 15.6 percent respectively.
Now a decision by the US Commerce Department on 29 Aug to levy preliminary antidumping duties of up to 23 percent against Chinese truck and bus imports, looks sets to plunge the sector into further freefall.
China’s Ministry of Commerce (MOFCOM) has denounced the latest sanction as protectionist and “an abuse of trade”, and the China Rubber Industry Association (CRIA) is organising Chinese tire makers and importers to lobby and appeal against the tariffs.