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.
A recent report from autopolis, the organisation offering strategic advice on the world’s auto industry, expresses some concern about future vehicle sales in Asia. It forecasts reduced sales in markets other than China for this year and next, picking up in 2003. Long term, says autopolis’s Graeme Maxton, Asia’s auto sales will grow by nearly five million units over the next ten years.
Vredestein boss Rob Oudshoorn is interested in making the Vredestein brand – already well-known in Europe – a global brand. In Asia, T-Trac and Protrac tyres are produced by sister company Elangperdana Indonesia for use in the Asia region of Indonesia, Malaysia, Taiwan, Hong Kong, China etc. The Importer Tyreland is the business partner at the other end of the world in New Zealand. This has been learned from the latest company brochure News Flashes which is distributed to the trade. At the moment it is not easy to cover Vredestein stories due to the fact that there is obviously no press office in the Dutch company.
According to the monthly investors’ update, the group is still under pressure. In the US the replacement business was quite good, not so in the OE business. In Europe, the group is suffering because of the warm weather, which is having a negative effect on sales of winter tyres, and in Asia, the company has been forced to lower prices due to the fact that cheap imports from China are putting pressure on prices. In a cost cutting move, Goodyear is offering an early retirement package for around 700 white collar workers, half of them working in the Akron HQ.
China Tire Holdings Ltd and Orion Tire Corp’s Lawsuit against Goodyear has been sent back to the federal court by the 9th Circuit Court of Appeals. This revives a long-standing battle over China’s grant of a joint venture plant to Goodyear. The claimants say that Goodyear unlawfully persuaded a state-owned factory to abandon a contract with China Tire. China Tire alleges that Goodyear gave gifts, including jewellery, scholarships and travel to Chinese officials. The case though may face early dismissal if China Tire do not present adequate new pleadings.
The executive board of Continental has said that it is looking to sell major parts of the ContiTech group in order to reinforce Conti’s core business as a supplier of chassis technology to the auto industry. The revenue generated will enable Conti to make further acquisitions. ContiTech’s sales last year were 1.4 billion Euros and it employs 14,000.
Vietnam’s rubber producers have called for a limit on exports of crude rubber. Exports to countries such as China have increased to the stage where the domestic rubber processing industry is facing a shortage of raw materials.
The joint venture has been confirmed between Michelin and the Shanghai Tyre & Rubber Co. to make radial tyres, steel cord and compounds. The new company will be called Shanghai Michelin Warrior Tire Co. and the JV is worth US$200 million. Michelin has a 70 per cent stake and STRC 30 per cent. Reports from China say that the company will continue to produce Warrior brand tyres and, at some time in the future, Michelin group products.
At a time when vehicle markets in the US and Europe are set to fall sharply, the outlook for most of Asia is not too bad, says a report from industry strategists Autopolis. It predicts a downturn in the region for this year and next, but, as 2000 saw record car sales (excluding Japan), the drop should be manageable. This year, only China and Malaysia are forecast to see sales of vehicles rise. The Japanese market is predicted to fall this year by 4.3 per cent and 2.4 next. For Asia outside Japan, the figures are minus 5.5 per cent (2001) and minus 3.3 per cent (2002). 2003 should see an upturn both inside and outside Japan, says Autopolis.
The Indian tyre manufacturing industry may be under threat from cheap imports from China. The lifting of trade restrictions with China has already created trading problems for many of India’s smaller industries. Presently imports from China form only 2.87% of India’s imports, but the arrival of cheap, mass produced products from China has indicated the lack of preparedness of Indian industry to meet the new competition. Tyre manufacturing has been highlighted as a potential victim as businesses move from manufacturing to importing.
China Tire Holdings, listed on the NY Stock Exchange since 1993, has brought a law suit against Goodyear in Ohio. Amongst other things the Chinese company accuses Goodyear of violating the RICO statutes and is seeking US$ 3.5 bn in actual and punitive damages from the American rubber giant.
Bridgestone Corporation has acquired control of a Chinese manufacturer who produces radial passenger and commercial tyres from the Republic of Korea’s Kumho Industrial Co. The company has a current production capacity of about 3.5 million tyres a year.
The Eastern Division of the Ohio District Court has rejected all claims by China Tire Holdings against Goodyear.
Well Express International (Hong Kong) is to purchase The Tirex Corp. Canada’s (Montreal) patented cryogenic tyre recycling system TCS-1 for approximately 2.25 m US-$. Both companies signed a Memorandum of Understanding to market, sell and possibly manufacture TCS-1 in the People’s Republic of China.
Despite the recovery in vehicle sales in Asia over the past two years, analysts are predicting a slowdown in sales in parts of the region, notably South Korea. The Asian car market is expected to fall by 3% next year, with little sign of recovery in 2002.
Not many years ago the large tyre manufacturers still thought they had better make haste and claim a stake in the apparently huge markets of China and India, since life does not favour latecomers. Their enthusiasm was kindled by the example of some car manufacturers, which quickly calculated and estimated a gigantic (sales) potential in these two countries alone with their joint populations of two billion. Some car manufacturers learnt quickly that opportunities are not limitless. Tyre manufacturers fared similarly. Pirelli supplied China with some know-how, which was gratefully received but did not provide Pirelli with a strong base. Nor did the Italians make money out of the technology transfer. Conti’s big plans for India are hardly mentioned any more. The “Big Three” – Goodyear, Bridgestone and Michelin – are present in both countries, but business is quiet. In India, 29 manufacturers run 41 factories with a maximum capacity of about 43 million tyres, but only 34 million pieces were manufactured in 1997/98, most of them (73 p.c.) for trucks and buses. And 60 p.c. of passenger car tyres are still cross-ply tyres, 1998 has only seen 3,3 million radials in this segment. Our British sister magazine TYRES &ACCESSORIES reported on the Indian tyre market at length; we publish an excerpt in this issue in our December issue, including a brief presentation of some individual companies active in this market.
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