Now one of the largest tyre-producing countries in the world, China has an indisputable influence on the direction of global tyre trade. The home of both fast-growing up-and-coming brands as well as a burgeoning domestic market, this tag chronicles China’s involvement with the tyre business.
Michelin has resumed production at its joint venture in Shanghai after halting operations to “clear its stock of unsold tyres,” reports news source Bloomberg.
The announcement follows several reports last week that stated the tyre factory would suspend production for months to come following a slowdown in sales in the Chinese market.
Production at Michelin’s Shanghai joint venture has been suspended for the past month following a “drastic slowdown in sales in the Chinese car market,” reports the South China Morning Post.
According to an unnamed source at Shanghai Tyre and Rubber, which owns 30 per cent of Shanghai Michelin Warrior Tyre, the production is likely to be halted for another one to two months, because of “continuing hard times.” The venture has yet to record a profit since its establishment in 2001.
Bridgestone will build a plant in Poland to produce rubber tracks for earthmoving equipment, the manufacturer announced today.
The plant is due to begin operating in July 2006 and will be located in the city of Zarow in the south western Polish province near Wroclaw. Production capacity is expected to reach about 26,000 tracks a year by 2007 and 12 million euros will be invested to achieve this.
The Society of Motor Manufacturers and Traders has launched its annual publication “Motor Industry Of Great Britain – 2004 World Automotive Statistics”.
At nearly 500 pages, the report contains its usual comprehensive, in-depth examination of various aspects of the market, including detailed analysis of car and other vehicle sales. And not just vehicles, as the report contains details of numerous components, including tyres.
After the company only recently confirmed plans to build its 48th tyre factory in Brazil, Japan’s Nihon Keizai is reporting that Bridgestone will build two more facilities. According to the newspaper the new factories will be built in China and Eastern Europe at a total cost of more than £253 million. The Chinese plant will produce bus/truck and passenger car products in China and is likely to be built in Huizhou, Guangdong province. As for Eastern Europe, a number of locations have been the subject of media speculation. Possible countries include Slovakia or Poland where Bridgestone already has a tyre factory.
The Asia Pulse new agency is reporting that an official from the Chinese State Development and Reform Commission recently said the government is soliciting suggestions from relevant parties on a draft tyre industry policy.
The policy, devised by the China Association of Rubber Industry and China International Engineering Consulting Corp, is expected to be made public in the first half of 2005, after it has been revised. The new industrial policy is expected to support enterprises developing advanced technology, encourage the production of radial tyres and slow down the production of bias tyres.
According to the draft policy, China will adopt market access management for tyre industry and work out compulsory technical rules relating to tyre quality, safety, environment protection, energy-conservation and raw material consumption. A memorandum and approval system will be introduced to newly established tyre factories or tyre expansion projects invested by domestic and foreign investors. Relevant requirements will be imposed on the amount of investment, technical ability and products for new tyre projects. The policy will also standardise the tyre import market and ban any forms of waste or used tyre import.
The new A1 Grand Prix series is set to commence in autumn next year. As the latest edition to the motorsports calendar it is not being viewed as competition to F1 and has managed to position itself in a different sector of single seater racing. Known as the World Cup of Motorsport, A1 differs from the current F1, in that the contenders will represent their home countries and all cars will have the exact same specifications having been built by the same manufacturer. The sport will use 3.4-litre V8 engines, mounted on a Lola chassis and fitted with Cooper tyres.
Founded by Sheikh Maktoum, a member of the ruling family of Dubai, and businessmen Brian Menell and Antonio Teixeira, the FIA sanctioned series will run in motor racing’s traditional ‘off’ season. It is described by the organisers as being unique in the fact that it brings together a sustainable business model with the high speed excitement of motorsport.
Amongst the countries that have secured their place so far are the UK, South Africa, China, Portugal, Pakistan, Lebanon, Australia, Canada and Malaysia. The participants represent more than 80 per cent of the world’s population. And Dubai, Bahrain, Qatar, China, South Africa, Malaysia, Indonesia, Japan and Australia have already been selected to host the first A1 Grand Prix season, and there is still the possibility of a further two events.
There has been much emphasis put on the fact that the sport will provide a patriotic atmosphere between contenders and their supporters, with chairman of the South African team, Tokyo Sexwale, commenting: “ It will create a new patriotic edge to the sport, and add a new dimension to one of the most popular sports in the world. We are proud and pleased that there will be a South African entrant in this exciting global event. We fully subscribe to the need to spread motor racing away from its traditional European and North American roots and into the developing world. Welcome to the world of Motortainment.”
One of the essential elements of the A1 GP is that it needs to be thrilling to watch. The belief that it will be a compelling spectacle for all motorsport fans was strongly endorsed when Sky Sports bought the broadcasting rights for live coverage in the UK, of not only the races, but also the practice and qualifying sessions. Sky Sports managing director Vic Wakeling said: “We have been sold on the concept of a genuine test of driving skills and it has the added attraction of providing us with more international sport throughout the winter months.”
Sun Capital Partners has announced that one of its affiliates has purchased Honeywell International’s Performance Fibres business unit. The terms of the transaction were not disclosed. The new business, Performance Fibers, is a global leader in high-performance industrial fibres and related materials, with operations in the US, France, Korea and China.
“We are excited about the future of this business and the many growth opportunities we see in the global market for industrial fibres and related technologies,” said Greg Rogowski, Performance Fibers’ president and chief executive officer. “We plan to continue our leadership in this industry and to grow by providing our customers with the technology innovation they require and the quality and reliability they expect.” M Steven Liff, Principal at Sun Capital Partners, Inc, a leading private investment firm specialising in leveraged buyouts added, “Performance Fibers is a global leader, and by combining our business expertise at Sun Capital with the strengths of Greg Rogowski and his management team, we expect to enhance Performance Fibers’ position in its market niche. Through our investment, the company will be able to take advantage of numerous opportunities that will strengthen its core competencies.”
Hankook Tire Company, South Korea’s largest tyre manufacturer has reportedly broken the half-a-billion unit mark after 63 years of tyre production, the Asia Pulse news service is reporting. “Hankook Tire can produce 1.68 tyres in one second, 481 times more than it could when it was established in 1942,” the company said. “Once the ongoing expansions of production facilities both at home and abroad are completed, we will be able to break the one-billion-unit mark before 2010.” Hankook Tire has two manufacturing plants in South Korea and two plants in China. Hankook is the world’s ninth largest tyre manufacturer.
Malaysian news sources are reporting that Lion Forest Industries Bhd is teaming up with Chinese tyre manufacturer Shandong LuHe Group Co Ltd to form a 75:25 joint venture company to produce Silverstone tyres in China. On 15 December the two companies said that Lion Forest’s subsidiary, Lion Rubber Industries Sdn Bhd, had signed an agreement with Shandong LuHe to form the joint venture company with paid-up capital of 152 million ringgit (approximately £21 million).
Lion Forest’s newly acquired subsidiary Quay Class Ltd and Lion Rubber also entered into an agreement with Silverstone Bhd’s 100 per cent subsidiary, iMpression Worldwide Inc, for the provision of technical know-how and services and the use of the Silverstone brand name. Silverstone Bhd is a wholly owned subsidiary of Silverstone Corporation Bhd.
Indonesia’s car production total for the first eight months of 2004 was up 18 per cent compared with the same period last year, reported the Indonesian APBI tyre association. In addition to the production increase, which equates to 23.37 million units, APBI chairman, A Aziz Pane explained that exports also rose to $301 million in the first eight months of 2004, from $247 million in the same period the previous. Mr Pane said exports contributed more to the sales total as sales on the domestic market had been depressed with large imports of cheap second hand tyres from China.
Minekazu Fujimura, CEO of Bridgestone Europe has warned that China’s production explosion is causing a severe shortage of steel cord, natural rubber and other raw materials, essential to tyre production.
Mr Fujimara told the Financial Times that the shortage has already driven up tyre manufacturers’ raw material costs by between 10 and 15 per cent, adding that further increases were inevitable. But it isn’t all bad. In the short term, Mr Fujimura conceded, the supply problems were proving to be financially beneficial. So far this year, the leading tyre producers have been able to raise their prices three times in acknowledgment of the rising cost problem.
As a result the big producers have reported improved results. Bridgestone itself has just reported operating income of $983m on sales of $12.6bn in the first three quarters. Goodyear this week reported a profit of $36.1m for the third quarter, its second successive quarterly profit after a long period of losses.
But Mr Fujimara is not resting on his laurels. “The problem is global and there is no escape from it. We have no choice but to pay the premium,” he said adding that the increases are likely to have a wider impact. “They will be working their way through into higher car prices,” said Mr Fujimura.
Motorsport isn’t just about speedy overtaking manoeuvres and exciting finishes. Instead a major part of its attraction is owed to the people that live for motorsports and who – if missing – would make the event that bit less interesting. Without doubt one of these people is Pierre Dupasquier. For 30 years the Michelin motorsport director has been generally regarded as the driving force behind the French tyre manufacturer’s involvement. In addition, he is one of the few who, although not a driver himself, is allowed to comment on races on TV. Tyres & Accessories had the opportunity to meet the passionate 67 year old Frenchman and talk about the coming season.
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Yokohama Rubber Co has announced that, by the end of December, it will have purchased 193,327 square metres of land adjacent to Yokohama’s Thailand manufacturing plant. When the newly purchased land is added to the existing site, this means that the Thailand subsidiary will more than double in size, growing to 418,427 square meters. Upon completion of the expansion plans, Yokohama Thailand will have a larger site area than any other Yokohama rubber subsidiary.
Following the news that it will double the size of its Thailand production plant, Yokohama has also announced that in December it will establish Yokohama Hose & Coupling (Hangzhou) a subsidiary for assembling and selling high-pressure hoses and their metal fittings in China. The subsidiary’s plant will be located in the Economy and Technology Development Zone, Hangzhou City, Zhejiang Province and commence operation in April 2005. The new company will be capitalized at $350,000.
In China, the demand for construction machinery has been rapidly increasing because of consecutive large-scale projects associated with the Beijing Olympic Games in 2008 and the Shanghai Expo in 2010. High-pressure hoses are a indispensable components for hydraulic devices used in construction machinery. At least for the time being, the new company will concentrate on the OEM business with Japanese construction machinery makers. At the same time, however, the company says it will “proactively conduct market research” in connection with the demand for replacement high-pressure hoses. It also plans to begin local production of metal fittings as soon as possible.
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