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China’s Tiremakers Facing Tougher Competition – From Majors

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China’s tiremakers are facing tougher – and growing – competition from major industry names as companies like Groupe Michelin, Bridgestone Corp. and others are boosting their investment in China.

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According to the People’s Daily, “Booming domestic market made foreign companies more confident in their expansion in China, and will lead to more fierce competition in China," said a manager from an unnamed Chinese tiremaker located in Shandong province.

Michelin recently announced a $1 billion investment to build a tire plant in Shenyang in southeast China; that facility is slated to open in 2012.

Continental AG started construction of a new plant in China last September with investment of 600 million euros and annual capacity of 18 million tires, including a new research and develpment facility in Shanghai.

Bridgestone is expanding its factories in China, and Yokohama Rubber Corp. said it was expanding its Hangzhou factory to achieve annual output of 5 million tires. Toyo Tire & Rubber Co. is investing $9.8 million to build a plant in Jiangsu.

China Association of Automobile Manufacturers has reported that China’s tire industry faced overcapacity of around 10% to 15%. “Compared with foreign-funded tiremakers, products of domestic companies mainly go to the low-end market, where tough competition continues," said the manager.

"In the coming couple of years, China’s demand for autos will remain as high as 15% to 20%. With the growing auto industry, alternative tire market will also expand," said Chen Aihua, an analyst with Guoxin Securities.

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