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U.S. President Barack Obama announced the implementation of punitive tariffs on China’s exports of American tires and cut off many of China’s tire companies’ exports to the United States. The immediate consequence of this is that large quantities of exported tires have to be turned “domestic†to join the already fierce competition in the domestic market. While most people are still angry at the “special protection caseâ€, the more realistic crisis has approached Chinese tire companies...
After the export has encountered major problems, the tire companies will be more fierce in the domestic market.
According to industry insiders, although the special security case is not enough to cause the destruction of the tire industry in China, it will bring a huge impact. If the sales of exports to the United States are transferred to domestic sales, it will inevitably increase domestic supply. The situation of overcapacity will also be inevitable. The competitive landscape of domestic tire companies will change accordingly.
Overcapacity reproduction
Tire surplus capacity has become an unavoidable issue. According to Shanghai Securities News, the share of exports to the U.S. market accounted for a large proportion of the total sales of many companies. In 2008, China's tire exports to the United States alone accounted for one-third of the total output. Once the export of the US market is blocked, such a large capacity cannot be digested domestically within a short period of time. The entire industry will face excess capacity even if it does not export. Enterprises with a small export percentage may also be involved in a "price war."
According to the statistics of the China Rubber Association, last year, China’s tire exports to the United States amounted to approximately US$2.2 billion, and the annual export of tires accounted for more than 40% of the total output. If we reduce the output of half the output of American tires, it means that China will have 12% of the remaining tire capacity, and will reduce foreign trade income by 1 billion US dollars.
According to incomplete statistics, the number of enterprises in the domestic tire industry above designated size is about 400. Up to now, with the world's fourth-largest tire giant German horse tires announced at the end of last year to build factories in China, the world's top ten giant foreign tire companies all fall in China, the domestic tire industry is already in a state of excess capacity. This 12% export to domestic sales of tire capacity, will undoubtedly make the Chinese tire industry overcapacity situation worse.
What is damaged is not only the tire companies themselves but also the upstream and downstream industries.
Yu Yongding, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, said that in the first half of the year, China's domestic auto industry has seen a better development, but foreign markets have been weak. In the first half of this year, China's tire exports have dropped significantly; in this case The passage of the special security case will not only directly cause 12% of the excess capacity of the tires, but will also cause various levels of product backlogs and sales difficulties in the rubber, carbon black, tar and coking industries of the upstream industrial chain.
Fan Rende, president of the China Rubber Industry Association, said: "Because of the financial crisis, China's tire industry has experienced double-digit declines in the number of major economic indicators since the beginning of the year, with one-third of companies losing money. After tire protection, China's tire exports The volume will decline by about 12%, even with the growth rate of the rubber industry falling by 5 to 6 percentage points."
Guo Ai Securities researcher Chen Aihua believes that for other domestic companies, the competition brought by exports to domestic sales or the transfer of export markets will intensify, and profits will fall. "The production line that has already started can't stop abruptly. Overcapacity can trigger a chain reaction."
Difficult to cross product + channel relations
The companies that originally focused on exports have now had to face some "unfamiliar" domestic markets. How can these tire companies successfully cross this transition? Companies that are actively seeking to open up the domestic market have found that product structure adjustments and the re-establishment of sales channels are all It was the “difficulty†that they had to overcome when they started “looking inwardâ€.
Hangzhou Zhongce Rubber Co., Ltd. is a typical example of the "prophetic vision" and the successful transition from "outside" to "inside." Xu Youming, the legal department of Hangzhou Zhongce Rubber Company, told reporters that they had made the worst plans before the United States announced the implementation of special tire protection measures. By adjusting production, tires currently exported to the US market accounted for only 20% of its total tire sales. Basically, sales have turned to the domestic market.
He told reporters that there are three reasons why they have not been affected by this tire special protection case:
First of all, their tire products are abundant, and the products exported to the United States are outside the category of special tariffs in the United States; secondly, their products are exported to as many countries as there are 160 countries; finally, their domestic marketing network layout is perfect. This is very helpful for their sales in the domestic market.
Qingdao Double Star is also lucky to escape this robbery, and its experience may also be worthy of reference by other companies. The relevant person in charge of Qingdao Double Star told the reporter that the special security case has had a minor impact on this, and they did it early because of their preparation. Since the global financial crisis in the fourth quarter of 2008, exports have declined, and the company has begun to take active measures, including timely adjustment of export strategies and the development of new export markets. From January to August 2009, the company’s income from the export of car tires and light truck tires to the United States was 42.15 million yuan (US$6.17 million), accounting for less than 2% of the company’s operating income for the same period; the profit was about 1.68 million yuan, accounting for less than 1 total profit for the same period %. However, more tire companies are not so fortunate. Those small and medium-sized tire companies that use the US market as their main exporter and whose product varieties are relatively simple are facing bankruptcy. For them, improving the technical level and actively developing the marketing network in the domestic market has become a top priority.
Yan Lixing, executive vice president of the National Association of Commercial Vehicle Parts Production and Marketing, believes that relevant departments and some industry associations should actively support domestic tire companies, adjust the structure of export products, and change the tire export from quantity-based to technology-based and profit-based models and establish their own brands. Improve product quality in order to get rid of the current predicament.
He said that tires and other parts enterprises should achieve technological upgrading as soon as possible, and strive to open up the domestic high-end market. Parts of self-owned brands are half as cheap as joint ventures and have obvious cost advantages. If the technology is further improved, it will have the strength to compete with the joint venture brand. Secondly, it is imperative to create a "brand", and the low gold content of product brands has restricted the development of auto parts companies. At present, more than 80% of China's auto parts exports still remain in the aftermarket maintenance market, and only a few enter the global market.
In addition, raising the industry's threshold is the work that the industry association has been working hard to push forward.
According to Zhao Wenquan, director of the Technical Committee of the China Rubber Association, the Ministry of Industry and Information Technology has repeatedly mentioned the issue of access after starting to formulate industrial revitalization plans in March this year. It has explicitly proposed to establish conditions for entry into the tire industry and hopes to introduce it before the end of this year. Deng Yaxuan, secretary-general of the China Rubber Association, said that the global financial crisis has made the tire industry more clearly see its own problems. Only by properly formulating industry access conditions, industrial adjustment opinions, and the “Twelfth Five-Year Plan†can the tire industry be healthy and steadily developed. .
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