Tiremakers face tougher competition in China

14:23, February 24, 2010      

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After the tire special safeguard case, the prosperous domestic market helped domestic tire producers overcome difficulties in 2009. Currently, China's domestic market is facing competition from global tire giants.

Multinational tire giants including Michelin and Bridgestone are increasing their investment in China, and haven't slowed down that investment even after the safeguard case.

"Booming domestic market made foreign companies more confident in their expansion in China, and will lead to more fierce competition in China," said a manager from a domestic tire maker in East China's Shandong province.

In January, Michelin, the world's second largest tire producer, announced that the company would invest 1 billion U.S. dollars to build a factory in Shenyang, which is planned to start operation in 2012. On February 2, Michelin let all other shareholders' rights at the price of 170 million yuan (24.90 million U.S. dollars).

Last September, Continental AG, Europe's second-largest tiremaker, has started a project with investment totaling 600 million euros and annual capacity of 18 million tires.

In 2009, investment in the Chinese market accounted for 80 percent of Japanese rubber industry in all the emerging economies.

Takeda Kunitoshi, Bridgestone (China) Investment Co., Ltd., noted that the company was expanding its factories in China and they would not cease investment in China.

Yokohama Tire Corporation has planned to expand its Hangzhou factory to achieve annual output of 5.10 million tires. Toyo tires announced January 28 that it would invest 9.80 million U.S. dollars in Jiangsu province to establish a wholly-owned subsidiary.

China Association of Automobile Manufacturers (CAAM) earlier stated that China's tire industry faced overcapacity of around 10 to 15 percent.

"Compared with foreign-funded tiremakers, products of domestic companies mainly go to the low-end market, where tough competition continues," said the manager.

"In the coming couple of years, China's demand for autos will remain as high as 15 to 20 percent. With the growing auto industry, alternative tire market will also expand," said Chen Aihua, an analyst with Guoxin Securities.

Overseas market, however, was still sluggish. Michelin said in a statement that sliding demand has dragged down the company's revenue by 9.8 percent to 14.8 billion euros.

Obviously, China's domestic tire market and the overseas market are experiencing completely different situations. But multinational tire companies have the ability to rearrange capacity globally, while domestic tiremakers depend too much on the domestic low-end market.

"Foreign companies were not impacted severely by the special safeguard case. With their global production and sales networks, they can easily rearrange the targeted markets."

"When answering the special safeguard case against tires produced in China, foreign companies were not very active," an industry insider said.

By People's Daily Online
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