Asia
An article in Asia Times quotes Eric Jugier, chairman of Michelin (China) Investment Co. Ltd., as saying that the company still considers China “an ideal investment destination for the world manufacturing industry”. He is also quoted as saying that Michelin plans to turn its operations in mainland China “into its biggest manufacturing base in the world”.
In the past we have often commented on the similarities between the battery and tyre markets, notably in the problems faced by both and their reactions to these. One such appears to be a sharp increase in the number of batteries entering the market from the Far East. It is true that many manufacturers in the tyre industry have moved their production to low-cost countries and they are not alone – witness the recent spate of press reports revealing that more and more call centres are deserting the UK and relocating to India – so why should this not be the case for batteries? After all, if all markets are faced with the same economic realities, then is it surprising that their responses are similar? Undoubtedly, there is an element of this in the figures, but no doubt some of the increase is due to products being made by companies originally based in Asia and sold aggressively on the European market. Battery imports from Asia to the EU rose last year by five per cent, to 7.3 million units. Not far behind were imports from Eastern Europe, which were up by four per cent. Most dramatic was the performance of China, which is now Europe’s main Asian importer, with 2.4 million batteries sold in the EU last year; an increase of 38 per cent over the previous year. But it is not only China, as batteries are coming into the EU from South Korea, Indonesia and Taiwan. In the UK aftermarket, Asian battery imports now account for over 50 per cent of all UK imports.
Reports in the Indian press suggest that Michelin has embarked on a tyre market analysis to determine whether it is worthwhile investing in a manufacturing facility in India. In 2000, Michelin was said to be considering an investment of Rupees 500 crore (around 90.5 million Euros) in a manufacturing facility, but the scheme fell through due to the low level of radialisation in the market.
Michelin has introduced two new tyres, designed specifically with Asian driving conditions in mind. Called ‘Pilot Preceda’ and ‘Energy MXV8’, the tyres have been designed to suit road and weather conditions in that part of the world, in both construction and tread pattern.
The Organisers of Tyrexpo Asia, ECI International Ltd., have announced new dates of 17 to 19 February 2004 for the fourth in the series of Tyrexpo Asia events. Paul Farrant, Managing Director of ECI International, confirms, together with the support of the industry, that it is in the interests of exhibitors and visitors to re-schedule Tyrexpo Asia from its original dates in September 2003 to the new dates of 17 to 19 February, 2004. It is believed that the current situation relating to the SARS virus could unduly affect the success of Tyrexpo Asia. By moving the dates to February 2004 it is anticipated that governmental travel restrictions will be significantly diminished and confidence in international travel fully restored.
Bridgestone is to invest 12.6 billion Thai Baht (256.79 m Euros) to raise output in Thailand of tyres, cord and carbon black, in order to meet expected rising global demand. Steel cord production at the Chon Buri factory will triple to 28,000 tonnes by 2005 and work will start on building a tyre factory there next April, producing 900,000 radial truck and bus tyres in the second half of the year. The Bridgestone group in Thailand consists of seven companies and the latest investments will see the local workforce grow from the present 3,600 to 5,500.
What of the major vehicle markets? We kick off with what has been happening in the automotive world in the first three months. Additional figures are now available from the International Rubber Study Group (IRSG) for tyre production in the main markets for 2002 for car tyres and for commercial vehicle tyres.
Sumitomo Rubber Industries has announced its intention to increase prices from three to five per cent in the second half of the year. These increases will apply to Sumitomo brand passenger, light truck, truck and bus tyres in Asia, Middle East, Latin America and Africa and they will vary according to country and product line. The increase is necessary, says SRI, because of increasing raw material costs and follows a similar price increase introduced in January this year.
Bridgestone Corp. has begun raising tyre prices by between 3 and 5 per cent in Asia, Oceania, the Middle East and Africa to cover rising costs of raw materials. The increases will cover Bridgestone and Firestone radial and bias passenger, light truck, truck and bus tyres. Prices in the Japanese market will not be affected. Bridgestone has been implementing the price increases in stages since March 1 to compensate for the rising costs of raw materials, including natural rubber, synthetic rubber, carbon black and some chemical additives.
Rudolph (Rudy) A. Schlais Jr. has been elected to the Board of Directors of Superior Industries. Until his retirement in May last year, he was Group Vice President of GM Corp. and President and CEO of GM Asia Pacific, overseeing GM’s entry into China as well as pushing the group forward in other markets.
South African Tiger Wheels is planning to realign its investments in wheel manufacturing, which might lead ultimately to an overseas listing for the company. This was announced by CO, Eddie Keizan, as he unveiled an impressive set of financial results for the six months to December.
Although turnover decreased by 0.8 per cent in 2002, compared with previous year, the Michelin group outperformed even analysts highest expectations with an operating income of 1.225 billion Euros (which is 7.8 per cent of turnover, and 18 per cent more than 2001). Net profit more than doubled to 614 million Euros. At the same time, management succeeded in reducing the debt mountain by more than one billion Euros – all within one year. Consequently, Michelin continues to be the best-earning tyre company worldwide.
Japanese tyre giant Bridgestone Corporation has reported a strong rise in net profit for the year ended December 31, 2002, and predicts a gain for 2003 as well, even though it warns that business conditions are getting tougher. Bridgestone’s group net profit more than doubled to US$378 million, from US$145 million, on brisk overseas sales. Group sales climbed 5.3 per cent to US$18,700 million, with pre-tax profit jumping 99 per cent to US$1,233 million. For the year to December 2003, the company said it expects group net profit to come to US$584 million, the same mark it initially set for 2002. It forecasts pre-tax profit to shrink to US$1,042 million and sales to slip to US$18,682 million. Bridgestone is boosting its capital spending in 2003 by more than 60 per cent to US$1.6 billion. The company’s president, Shigeo Watanabe, said the investment is aimed at boosting output capacity in Thailand and Poland, as well as upgrading each plant in Japan.
Towards the end of January, news broke of a partnership agreement between Michelin and Hankook Tire, whereby the French manufacturer took a 10 per cent stake in the Korean company. The deal was signed in Seoul by Hankook Tire president Choong Hwan Cho and Michelin Asia-Pacific president Jean-Marc François and, according to the official communiqué, the purpose was to allow the companies to exploit synergies in a search for common opportunities to develop their respective positions in the tyre market.
For the second year running, Bridgestone and MRF Tyres have tied in first place in the JD Power Asia Pacific 2003 India Tire Customer Satisfaction Index Study, which examines customer satisfaction with originally-fitted tyres after 12 to 18 months of ownership. 2,700 owners were quizzed on 15 different attributes. The overall average score improved by 28 points over last year, reflecting the efforts made to enhance customer satisfaction. Top score was 768 (maximum = 1,000) and Bridgestone and MRF were closely followed by JK Tyres (766, just above the industry average of 764). Goodyear scored 751 and CEAT was the lowest, with 730.
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