Cheng Shin launching 40 million tyre capacity expansion in China

Luo Yongli, deputy general manager of the company, recently told a briefing that he is optimistic about the operation of Cheng Shin in 2023. In the past, Cheng Shin has reportedly significantly reduced capital expenditures to combat adversity in the operating environment. But with the overall situation expected to improve, the tyre maker will start expanding production capacity, including launching a 40 million tyre capacity expansion plan at factories in mainland China.

Luo Yongli said that the Chinese mainland market would improve in 2023. He believed that although the diagnosis rate in China is still very high, the first wave of infected people has recovered and resumed work, driving the factory’s production capacity to increase gradually. After passing the peak infection period, the demand for tyres in the Chinese market will increase.

However, Luo Yongli pointed out that the Chinese mainland market may be affected by inflation in 2023 and needs to be carefully observed. It is reported that Cheng Shin’s inventory is currently maintained at a relatively reasonable level. Cheng Shin has five factories in mainland China, located in Kunshan, Xiamen (two factories), Zhangzhou and Chongqing, and 47.8 per cent of the operating income of these factories comes from domestic sales.

Regarding the raw material prices, Luo Yongli said they reached a recent high in the third quarter of 2022 and declined slightly from October to December. He expected the prices to continue the decline in the first quarter of 2023. It is reported that the growth rate of the carbon black price has slowed down, and the price of natural rubber is expected to fall within 5 per cent in the first quarter of 2023.

Cheng Shin’s factories in India and Indonesia currently mainly produce motorcycle tyres. Luo Yongli said that India and Indonesia are emerging markets and less affected by inflation. However, Cheng Shin will adopt a more conservative expansion strategy for factories in these two countries due to the unstable overall international situation. By the end of 2023, the daily production capacity of the Cheng Shin Indonesia plant is expected to reach 40,000 tyres.