Linglong speeds up expansion against market headwinds

Article from the ERJ China Tire Report 2018, published as a supplement in the July/August issue of European Rubber Journal magazine

With pressure to meet growing demand, Linglong Tyre announced in February its new “5+3” strategy, provisioning five plants in China and three overseas, compared with its “3+3” strategy from a year earlier.

Last year Linglong reported a 32% jump in revenue to €1.8 billion (13.9 billion yuan), half of which came from the overseas markets.

Net profit less non-recurring items rose by 6% to €134 million, making it one of the few Chinese tire makers that saw an increase in profitability.

Overall gross margin rate, although down by 4% to 24%, is still considerably higher than the average of seven listed Chinese tire makers at 18%.

The company sold a record high of 49 million tires last year, up 16.4% from 2016 worldwide, and last year was China’s largest passenger car tire maker and second largest truck and bus tire maker.

OE supply 'firsts'

Linglong claims to be the first Chinese tire maker to become a global original equipment supplier to world-class brands such as Volkswagen, Ford and Nissan, with its original equipment sales raised by 52% to €595 million in 2017.

It currently has two plants in its headquarters province of Shandong, one in south China’s Liuzhou, Guangxi and one in Thailand operational since 2014.

Its de facto annual capacity has reached 48 million passenger car tires, 8 million truck and bus tires and 1 million bias tires. Besides the bias tire facility and one project in Dezhou, Shandong suspended due to environmental regulations, all of the company’s facilities had over 85% capacity utilisation rate in 2017.

On account of such pressure, in February Linglong revealed a plan to build a fourth China site with nearly 14.5 million unit total annual capacity and €742 million investment in central China’s Jingmen, Hubei.

Site expansions

The company is also expanding its existing sites to add at least 6 million units annual capacity by the end of 2018. Details of the other three projects, including one in the US and one in Europe, have not been disclosed. Smart manufacturing machinery will be installed at all new plants.

Linglong estimates its total production will reach nearly 58 million units this year, with a 12% rise in revenue and a 10% rise in net profit. It also predicts a 20% yearly growth rate in production and sales volume over the next few years.

Part of Linglong’s confidence comes from its growing research ability. Over the past few years Linglong has set up research centers in Beijing, Germany and the US to pool new talents, coordinating with its headquarters to work on new product development as well as cutting-edge areas such as dandelion rubber tires, graphene-compound tires and 3D printing.

Relaunch

Last year the company relaunched a premium label Atlas, a US passenger car tire brand it had acquired and upgraded, and states its performance is on par with or better than international brands.

Last year Linglong invested €4 million to set up a subsidiary dedicated to dandelion latex research and also formed strategic alliance with over a number of universities and institutes to spur innovation in this area.

A further initiative announced last November revealed that Linglong will be heading three relevant projects: snow tires using dandelion rubber, heavy duty tires using gutta-percha and passenger car tires using bio-based itaconate.

On graphene-compound tires, Linglong has been able to lower the cost for graphene oxide production and developed its rubber latex compound. Application research on formula for heavy duty tread, sedan tread and engineering tread has been conducted, and progress has been reported in improving tire puncture resistance.