China has been the largest global producer and consumer of tires since 2005. Tire production and consumption has registered very healthy growth in the 21st century, yet in the last few years, especially the last two, the market has proven to be very challenging for domestic and foreign companies operating in the country.
More than 300 big, mid-sized and small tire producers across all segments exist in China. The Chinese tire industry is the world’s largest in value and volume. According to data from the China Rubber Industry Association Tire Branch, the 38 key member companies produced a total of 529.22 million tires in 2021, an increase of 11.28% as compared to 2020. Total output of passenger car tires was 378.42 million, a year-on-year increase of 14.25%, while output of TBR tires was 122.39 million, a year-on-year increase of 4.12%.
Tire output registered a sharp decline in China in 2020. Along with a decline in the domestic market, export markets registered a sharp decline. Though in 2021, the Chinese tire industry registered steady growth, it was on low base of 2020.
According to data from the China Association of Automobile Manufacturers, the production of automobiles in China totaled 26.082 million, an increase of 3.4% year-on-year. The sale of automobiles in China totaled 26.275 million, an increase of 3.8 % year-on-year, that ended three consecutive years of decline since 2018.
Major companies operating in the China tire market are Hangzhou Zhongce Rubber Co. Ltd. ( ZC Rubber), Giti Tire (China) Investment Company Ltd., Sailun Jinyu Group Co. Ltd., Kumho Tire Co. Ltd., Triangle Tire Co. Ltd., Hankook Tire China Co. Ltd., Double Coin Holdings Ltd., Cheng Shin Rubber (China) Co. Ltd., Aelous Tyre Co. Ltd and Prinx Chengshan (Shandong) Tire Company.
Raw material prices for Chinese tire producers registered a steep increase in 2021, impacting the profitability of tire producers. This along with rising RMB (Chinese Yuan currency) exchange rates created an undesirable situation for most of the tire producers in the country.
Navigating Rough Waters
This year, the Chinese tire and automotive industry has experienced quite a few headwinds. Though specific figures for tire output have not yet been released, it is estimated that the tire industry in China has undergone significant decline as compared to the first six months of 2021.
China’s economic growth has slowed sharply in Q2 2022, according to the government’s official data, highlighting the colossal toll from widespread COVID lockdowns. Output contracted by 2.6% between April and June compared with the previous quarter, according to a statement from the Chinese Statistics Bureau.
On an annual basis, the economy grew 0.4% in the second quarter, the worst since the pandemic-hit first months of 2020. That was worse than the forecast by economists of 1% growth.
Anti-Dumping Duties and Ongoing Investigations
In recent years, the United States, the European Union, Brazil, India, Egypt, South Africa and a number of other countries have imposed anti-dumping duties or have been investigating the dumping of tires from China in their domestic markets. Some of these countries have restricted the imports of tires from China by increasing the certification of their domestic products. This has made it very difficult for Chinese tire producers to export to these markets.
To circumvent these trade and technological barriers, Chinese tire companies have gone abroad to build tire production units in Thailand, Indonesia, Cambodia, Serbia and other countries.
Focus on Exports
China has emerged as the largest exporter of tires in recent years. Huge capacity addition by domestic companies during the first five years of the last decade created an oversupply in the domestic market, which forced tire producers to look for export markets.
Chinese global exports of passenger vehicles increased by 13.6 percent during the 2015-19 period to $5.6 billion in 2019, representing average annual growth of 3.4 percent per year. However, this figure is still below the all-time high exports of $6.1 billion recorded in 2014. The main reason has been the anti-dumping duties imposed by the US, which led to a record exports decline in 2015 of $4.9 billion. Exports in 2015 declined by $1.2 billion or 19 percent compared to 2014.
After a few years where the pace of new investments had slowed due to both overcapacity and COVID, China is once again attracting major new expansions in the tire industry.
Some of the newly announced manufacturing facility projects include Giti Tire’s $1.1 billion project to move one of its five tire plants to Changfeng, Anhui; Guizhou Tyre’s $310 million truck and OTR tire project in Guizhou, Guiyang; Jiangsu General Science’s $472 million project in Anqing, Anhui; Shandong Linglong’s $950 million factory in Tongchuan, Shaanxi; and Sailun’s $142 million project in Weifang, Shando