Tyre Industry Hits a Host of Roadblocks

(India/Rubber Asia) After over 70 years of its existence and continuous development, China’s tyre industry is on firm ground. The Chinese tyre-making sector has now evolved into a huge, full-fledged industrial system that continues to attract international attention. However, there are obstacles to be overcome After becoming a member of the World Trade Organisation (WTO), China’s tyre industry entered the era of diversified ownerships. And, the industry transformed itself into three types of ownerships – state-owned or state-controlled, private, and foreign-funded enterprises – from a wholly state-owned system. Thus, China’s tyre industry has entered a critical period and, in the process, is facing new challenges and responsibilities.

In the wake of the country’s introduction of macro-economic policies as well as social development, China’s tyre industry is facing a host of challenges and problems. The industry’s development has entered a crucial period.

Analysis of data available for the last few years shows that China has become one of the world’s largest tyre producers and its march ahead is still continuing. Tyres made in China are now gradually being recognised and accepted by many countries around the world. Tyre exports from China have exceeded imports for many years consecutively. Domestic tyre manufacturers are concentrating on independent technical innovations and developing new products.

Along with advancement, there are new challenges facing the industry. Perhaps the most important of them is that the Ministry of Commerce recently changed the foreign trade policy slightly, resulting in a change in rebates for tyre exports. In the last two years, China’s tyre exports have faced an increasing number of anti-dumping cases, which have adversely affected the country’s exports to a certain extent.

Then there is the shortage of natural rubber (NR) and of other raw materials. Import tariff for NR has been raised to 20%. Both the increase in NR tariff and tightness of resources are obstructing the development of the rubber industry to some extent.

Another negative aspect is that China’s industrial policies and product standards, which are rather backward, cannot support the technological advances made elsewhere in the world. Lack of scientific testing facilities really poses a problem. The country has not yet built a tyre testing site, and funds for research and development are scarce.

However, China’s tyre industry has entered a new period of transformation. Now it should insist on radial tyre development and phase out excess production capacity of bias tyre. The industry must speed up upgrading of tyres, change the growth mode from quantity to quality and efficiency.

Already, China has restricted production of bias truck tyres. Building of new joint venture bias tyre plants has been disallowed by the government. The existing bias tyre plants, with an annual output of 600,000 sets, will be phased out. Even to produce the required off-the-road bias tyres for the domestic market, the government will no longer approve new projects of bias OTRs. Also banned is any haphazard production of agricultural bias angle tyres.

Development targets

The Chinese tyre industry needs to aim at making tubeless radial tyres for the passenger-tyre and light-truck tyre segments. Tyres intended for low-cost cars should meet the criterion for safety, energy-saving and environment-friendliness. This is to compete in the international automobile market in the matter of quality and performance. The production of radial truck tyres should be 20-25% of the total tyre production. Off-the-road tyres (OTRs) should be radialised, especially large-sized OTRs.

Steps for development

Accelerating independent innovation: China should actively create conditions to build a scientific research system and also an independent innovation system for China’s tyre industry. Large tyre makers and large corporate groups would be the mainstay of the country’s rubber industry. China needs to build up research in tyre technology, set up research and development centres, develop and produce more tyre types with independent intellectual property rights, and update all the technical levels of the nation’s tyre industry.

Cultivating leading tyre manufacturers: The country has to focus more on tyre production and promote the leading tyre makers in China and set up large tyre manufacturing companies and corporate groups. Qualified enterprises can build cross-regional and multinational tyre groups. Further, levels of tyre technology, management, production, and the network to procure raw materials and marketing have to be upgraded.

Building up famous brands: Through the implementation of brand strategy, China should actively build up brands which are famous worldwide and institute awards for those brands which perform excellently. Manufacturers of passenger tyre and light-truck tyres should cultivate famous brands.

Recycling for eco-protection: Rational use of energy and natural resources has to be resorted to by the tyre makers in China in order to protect the environment. Tyres should be recycled, new materials for tyre production have to be found, production costs need to be lowered and economic efficiency improved.