The annual production and sales volume of China's autos has made foreign tire companies in the upper reaches of the industry chain almost crazy.

This is particularly evident in foreign tire companies: Since last year, they have started a new wave of capacity investment in China. At the same time, more and more multinational tire companies are beginning to “pull their minds” on front-end capacity reserves and terminal sales channels.

Capacity War

TOYOTIRES from Japan was originally a typical Japanese company that was cautious and almost conservative. However, this conservative style has been completely broken by the blowout momentum of Chinese cars for several years. The first factory set up by Toyo Tire in China, and the first factory in Asia except Japan, has officially laid the foundation for the bonded area in Zhangjiagang City, Jiangsu Province.

Dongyang Tire broke the conventional expansion drive and became the best footnote for foreign-owned tire companies to accelerate “staking their claims” in China in the past two years.

The new tire factory, which was invested by foreign companies with a single investment of nearly US$100 million, will be put into production by the end of next year, with a capacity plan of 2 million high-performance tires.

From the reporter's understanding of the situation, Dongyang Tire is not the first large-scale investment in foreign tire companies in China, not to mention the last one. The actual situation is that since last year, the world's top ten tire companies have announced the construction and expansion of tire projects in China.

Michelin plans to invest US$1 billion in Shenyang to build passenger and load-bearing tire plants with a daily production capacity of 28,000 units and put into production in 2012. It will invest USD 25 million in repurchasing shares of Michelin Shanghai Warrior Tire Co., Ltd., all of which will be controlled. Bridgestone plans to increase its capital by 98 million U.S. dollars and expand its production capacity in Wuxi from 8,000 Nissan to 12,000, and it will reach production in July 2011. Pirelli plans to invest US$300 million to increase the production capacity of passenger cars in China and Romania by 60%, and to increase the production capacity of truck tires in China, Egypt and Latin America by 20%.

At the same time, Continental plans to invest 185 million euros in a new car and light truck tire factory in Anhui, with an initial design capacity of 4 million tires per year. Cooper plans to invest $17.9 million to increase its stake in Chengshan. Yokohama Tire Corp plans to invest 7 billion yen to increase the annual production capacity of the Hangzhou passenger car tires plant from 3 million to 5.1 million, and is expected to reach production in January 2011.

According to incomplete statistics, in the past 12 months, the world's major tire manufacturers' annual investment budget for 2010 is more than 8 billion US dollars, and plans to add 100 million sets of tire production capacity. According to the “European Rubber Journal” report, this figure was more than three times that of 2009, the second highest investment budget year in 25 years. It is worth noting that China is the place where the largest investment in tires is attracted. It is estimated that this figure is more than US$ 3 billion.

Decisive channel

The large-scale investment expansion of tire companies in the Chinese market has already attracted the attention of the Tire Branch of the China Rubber Industry Association. In August this year, the industry association officially issued a “announcement on early warning of tire production and operation”. The report stated that the current tire industry investment expansion “overheated” and there is an overall excess production capacity investment risk.

More importantly, as the scale of procurement of vehicle companies increases year by year, the former’s “bargaining power” for tire companies has also risen so much that many tire executives have complained to reporters privately to support the entire vehicle industry. The OEM market is just "swollen and full-fat." In fact, the single-tire profit has been maximally compressed by the entire vehicle company.

In order to ensure that “there is both face and inside,” more and more foreign tire companies have begun to roll out sales and service outlets across the country, turning to private replacement tire markets with higher profit margins. The reporter learned that Bridgestone, Michelin and Goodyear started planning and expanding various types of retail stores as early as five years ago, and Dunlop, Kumho, Hankook and other brand tires subsequently joined the competition.

Goodyear's “nanny plan” has made it a service network of 700 authorized service centers, 100 distributors, and more than 1600 contracted retail stores. Michelin's "Go with you" program has expanded to more than 200 cities across the country, 500 central stores and more than 1,800 designated service retailers. Bridgestone, on the other hand, establishes a "Wings of the Wing" store in the country directly, and will expand to 500 at the end of this year.

According to Qian Pingtai, general manager of passenger tires of Giti Tire (China) Investment Co., Ltd., 2010 will be the peak period of China's tire replacement market, and it is expected that there will be 80 million market launches. In the next year, Giti Tire will replace tires in the replacement market. Strive to achieve a 10% share goal. In the aspect of channel construction, Jiatong Tire has launched a car service station plan this year, which will achieve the goal of building a network of 10,000 car service stations nationwide within 2-3 years.

A senior executive of Yokohama Tire, who asked not to be named, told reporters that the profit of replacing the tire market is usually 2-3 times that of the original market. This is due to the fact that the replacement tire market is directly oriented to consumers, and there are many links in the middle, in particular, the shortage of vehicle manufacturers' consideration of driving down tire prices.