CITExpo 2023: Recovery and transformation of China’s tyre industry

In early September, the 18th China International Tire Expo (CITExpo 2023) was held in Shanghai. After three years of waiting, this year’s show attracted many dealers from overseas. An exhibitor from Jiangsu General told Tyrepress China: “The results of this year’s China International Tire Expo are quite good. We made appointments with 60 customers before the exhibition. Basically, all of them came. At the same time, we also met many new customers at the exhibition today.” At the popular CITExpo 2023, Tyrepress China noticed that China’s tyre industry is showing two new trends: recovery and transformation.

At CITExpo 2023, many tyre companies revealed that this year’s business data has increased significantly year-on-year. Richard Li, ZC Rubber’s marketing director of international business, told Tyrepress China that tyre companies have shown an excellent trend in 2023 compared with other Chinese chemical industries. Zhang Hui, director of the First Marketing Department of Wanda Boto, said their factory’s operating rate is above 95 per cent.

Industry recovery relies on exports

This promising trend can be verified from the semi-annual reports of many tyre companies participating in CITExpo 2023. In the first six months of 2023, Sailun’s revenue reached 11.63 billion yuan (approximately £1.31 billion; €1.51 billion), a year-on-year increase of 10.84 per cent; Guizhou Tyre’s performance increased by more than 10 per cent, reaching 4.44 billion yuan (about £500 million; €580 million); Jiangsu General’s revenue increased by 5.53 per cent, reaching 2.24 billion yuan (about £250 million; €290 million); Qingdao Doublestar’s revenue was also approximately 2.24 billion yuan, an increase of 15.74 per cent.

The recovery of China’s tyre industry is inseparable from the rapid growth of exports. Tyrepress China learned at CITExpo 2023 that the performance of some tyre companies in the Chinese market this year was unsatisfactory, and product prices remained low in the replacement tyre market. At the booth of a listed company, a salesperson in charge of the Chinese market said: “Due to the downgrade of consumption (in the domestic market), the performance of Zhejiang and Shanghai regions (China’s economically developed regions) has not yet reached expectations. Our company’s all-steel radial tyre sales team has performed well in the replacement tyre market in provinces such as Shanxi, Inner Mongolia, Ningxia, Qinghai and Tibet (relatively underdeveloped regions in China). Sales in these areas were low last year, and the business volume this year is not large but is growing relatively quickly.”

At the same time, the sales of new energy vehicles have increased significantly, significantly impacting China’s semi-steel radial tyre replacement market. Increased sales of new cars have reduced the need for replacement tyres. A new car takes at least two to three years from initial purchase to tyre replacement. Many car owners may not consider buying tyres until they need to be replaced.

Overall, China’s tyre market is similar to China’s overall economic trend this year and is at a low level. Different from the sluggish performance of the domestic market, the decline in shipping costs and the RMB exchange rate have allowed China’s tyre exports to usher in an explosive period in the first half of 2023. Many Chinese tyre manufacturers face a situation where orders from overseas markets are abundant, and supply exceeds demand.

In the first six months of 2023, China exported approximately 300 million tyres, a year-on-year increase of 6.9%; the export value was 72.077 billion yuan (about £8.08 billion; €9.34 billion), an increase of 20.6%. Chinese tyre companies have undoubtedly been affected by the buoyant exports. Data show that Yongsheng Rubber’s export sales exceeded 2.2 billion yuan (about £250 million; €290 million) in the first half of this year, a year-on-year increase of 8.5 per cent. As a listed company with no overseas factories, Triangle’s 2023 semi-annual report shows that “strong overseas market demand” is an essential reason for the year-on-year increase in net profit in the first half of the year.

The 18th China International Tire Expo (CITExpo) officially opened in Shanghai on 4 September 2023 (Photo: Scott Parker-Copestick/Tyre Industry Publications Ltd)

The supporting role of exports in performance highlights the importance of CITExpo. One of the persons in charge of the exhibition told Tyrepress China that compared with other large-scale tyre exhibitions in China, the most significant feature of CITExpo is that it is a professional exhibition focusing on exporting tyres and wheels. He said that most of the exhibitors at this exhibition are from the international departments of tyre and wheel manufacturing companies. He added: “Compared with CITExpo, the Guangrao exhibition focuses on China’s domestic market; the Qingdao show does not have a significant focus; the exhibitors at the Frankfurt belong to the auto parts industry, and the scope of exhibitors is wider.”

At CITExpo 2023, which focuses on exports, many tyre manufacturers showed their new products and technologies. Sailun displayed semi-steel radial tyres and all-steel radial tyres made of “liquid gold”. A staff member of the tyre manufacturer told Tyrepress China that all-steel radial tyres containing the company’s special compound are produced at the Qingdao factory. Its output does not account for a high proportion of Sailun’s overall all-steel radial tyre products. Qingdao and Dongying factories produce semi-steel radial tyre products containing liquid gold. According to this staff member, after the construction of the Qingdao Dongjiakou factory is completed, it may assume the critical responsibility of producing a series of liquid gold products.

In addition to Sailun, many participating tyre companies displayed their flagship products. Among them, some products of Zodo and Tercelo were exhibited for the first time. Zodo unveiled its Conquewind R/T tyre for the first time. The tyre manufacturer said that their new product breaks the design of traditional RT tyres and adopts a new shoulder structure, which significantly improves sidewall strength, grip, comfort and other properties. Tercelo exhibited its engineering tyres ADT02 and giant tyres RDT01 for the first time.

Guizhou Tyre unveiled its giant OTR tyres (Photo: Xuda Wang/Tyre Industry Publications Ltd)

In addition, Huasheng Rubber displayed new energy vehicle tyres, colourful customised series tyres, and complete hot melt and semi-hot melt racing tyres. Li Xianghai, Chairman of Fangxing Rubber, personally led the team to conduct strategic cooperation and exchanges with many customers. Fangxing Rubber’s tyre brands displayed this time include Himalaya, Glede, Opals and Naaats. The brands displayed by Hubei Aulic include Aulice, Vanlustone and Aosowing.

The tyre companies that have carefully prepared for CITExpo 2023 have also given back. Richard Li said that basically all of the old customers who made appointments with ZC Rubber before the exhibition arrived this time. An employee of Fangxing Rubber revealed to Tyrepress China that they received about 15 new customers from overseas within a few hours, which is uncommon in other exhibitions they participated in this year. When communicating with Tyrepress China on the show’s first day, Zhang Hui from Wanda Boto said that the effect of the day exceeded his expectations.

China’s tyre industry in transition

At CITExpo 2023, many foreign tyre trade practitioners expressed the idea that the entire industry is slowly recovering, driven by exports. Compared with the multiple exhibitions they participated in in the past two years, the number of orders and high-quality customers at this exhibition has significantly increased. However, in addition to recovery, another essential message displayed by tyre companies at CITExpo 2023 is transformation. Tyrepress China learned that tyre dealers from the Middle East, Africa, Russia and other regions were more active at this year’s China International Tire Expo.

It is reported that some American customers did not appear at CITExpo 2023 because they wanted to participate in the SEMA exhibition. Europe is still one of the more active customer groups at the China International Tire Expo. However, from focusing on the US and European markets to beginning to pay attention to the tyre market in underdeveloped regions, it is undoubtedly a change for the Chinese tyre industry.

This change is sometimes a forced choice. Taking the European market as an example, it presents the dual facts of high profits and high entry barriers. On the one hand, it is difficult for Chinese tyre companies to contact large European dealers. These dealers have relatively stable supply channels. On the other hand, small dealers require lower tyre quantities, which is different from the long-term development plans of many tyre manufacturers. Meeting medium-sized and suitable European dealers is difficult for some tyre companies participating in CITExpo 2023. The person in charge of foreign trade of a tyre company said somewhat helplessly: “Sometimes, I feel that it is difficult for our company’s products to enter the European market.”

Zhang Hui, director of the First Marketing Department of Wanda Boto, stated that the results of the first day of the exhibition exceeded expectations (Photo: Xuda Wang/Tyre Industry Publications Ltd)

While pursuing the European market, expanding the tyre market in underdeveloped regions has become a practice of many tyre manufacturers. Wanda Boto Zhang Hui told Tyrepress China that their semi-steel radial tyre products are in a growth stage in the European market, especially the British market. At the same time, Wanda Boto’s products proliferate in the Asian, African and Latin American markets. Hubei Aulic said they have established sales networks in many countries and regions, such as South America, Southeast Asia, and Africa. Compared with the European and American markets, developing countries do not have such high-quality requirements for tyre products, and the entry barriers are relatively low. Some products sold initially in the Chinese market can be sold directly to this region without modification.

However, the slowdown in the global economy has caused changes in the European and American markets where entry barriers were originally too high. Specifically, the economic downturn in developed countries has allowed some Chinese tyre companies to see opportunities to seize the replacement tyre market in these regions. After the epidemic, the consumption concepts of global consumers have changed. For European and American consumers, consumption downgrade may cause them to no longer use the products of higher-priced leading tyre companies and instead choose cost-effective Chinese-made tyres. Therefore, some Chinese tyre manufacturers may specialise in producing “higher quality” and “competitively priced” products to enter the replacement tyre market in developed countries. Since the second quarter of 2023, many Chinese tyre manufacturers have received many overseas orders, which seems to verify that consumers in developed countries are experiencing a “consumption downgrade”.

Another change conveyed by this year’s China International Tire Expo is that some employees in the tyre industry no longer unquestioningly worship overseas factory buildings but express concerns about future overcapacity. Many Chinese tyre companies have established factories overseas to circumvent trade barriers. In 2023, tyre manufacturers such as Shanghai Huayi (Double Coin), Jiangsu General, Sentury, and Haohua reported news of building or expanding overseas production capacity. Tyre manufacturers that established factories overseas in the early days did have certain advantages. At CITExpo 2023, multiple exhibitors told Tyrepress China that Linglong’s Serbian factory will manufacture the tyre brands they hold.

However, with the substantial increase in production capacity, overseas factories may present an overcapacity crisis. An employee in the tyre industry who did not want to be named said: “If overseas production capacity suddenly increases rapidly and market demand does not change significantly, the entire tyre industry may experience an ‘oversupply’ crisis globally.”