Double Star Green Tire Project Progressing
Qingdao Double Star’s factory relocation and new green tire production base project has been underway. The new factory is expected to produce two million eco-friendly steel-belted passenger tires per year by May 2015. By the end of 2015, capacity will increase to four million units annually, and by the end of 2017 even more capacity will come on stream.
Considering the pressure of environmental protection concerns, green tire technology will become the development direction for the Chinese tire industry. At present, about half of the tire production enterprises have the capacity to produce a green tire, but because of the cost and technical reasons, there are very few enterprises that have really put them into production.
The new Double Star production base is adjacent to the Dongjiakou port, which has an annual planning throughput of 370 million tons. It is very convenient for Double Star to build a global network in terms of both the production equipment and raw materials acquisition, or the tire product sales and export.
According to public data, Double Star is mainly engaged in the business of tire manufacturing. The 2013 Double Star sales volume has reached 8.67 million tires. In term of tire business revenue, Double Star has reached $754.35 million, of which all-steel radial tire sales revenue reached $593.85 million.
The company’s all-steel tire and semi-steel tire gross margins were 8% and 13.1%, respectively, in 2013.
ChemChina Rubber to Introduce Strategic Investors
According to a recent announcement from Aeolus Tyre Co., its controlling shareholder – ChemChina Rubber, part of state-controlled ChemChina, will be the introducing strategic investors.
After this capital increase, shareholder portion of the strategic investors will be less than 49% and the amount of this financing will be no less than $320 million.
At present, the project has been listed in the property rights exchange platform in Beijing.
ChemChina Rubber is a wholly owned subsidiary of ChemChina, with the registered capital of $119.14 million and assets of $2.73 billion. It was formerly the China National Tire & Rubber Corp., and became ChemChina Rubber in February 2013.
ChemChina Rubber is mainly involved in research, development and operations of tires, rubber and related products. Its annual tire output is more than 20 million units, as well as 16 million square meters of conveyor belting, and 19 million rubber hoses for automobiles. Tires include bias truck tires, bias OTR tires, all-steel radial truck tires, all-steel radial OTR tires, aviation tires and other special tires.
The company produces tires under the Aeolus, Henan, Double Happiness and Torch brands, among others.
With China Tiremakers, Branding Trails Technology
The Double Star brand has a long history, and is one of the most important tire enterprises in China. The brand is nearly 100 years old, and is renowned at home.
The company has three tire production bases in China with an annual capacity of 11 million tires. In 2013, the company’s tire output has ranked 10th in the Chinese domestic tire market.
There is still growth room in domestic tire demand, and China has become the world’s most important tire producer and consumer market. With domestic auto sales showing continuous and stable growth and with the expected rapid expansion of automobile ownership in the future, China’s domestic tire demand will see continued stable growth, especially in the replacement market.
But the domestic tire industry needs a brand upgrade. There are a lot of domestic tire enterprises at present, but very few with strong branding – at home and especially in other countries.
Chinese tire companies can only rely on a price advantage to compete in the low-end market. But because of the lack of scale and lack of brand awareness, the profitability of domestic tire enterprises is far lower than leading international enterprises. When Chinese tire producers attempt to move into higher segments of the market, with higher prices and greater profitability, the lack of brand awareness will certainly hurt.
In the future, only those enterprises that pay attention to research and development, product quality management and have a strong brand concept can have the outstanding performance.
China Tire Mold Industry: Contradictions and Problems
The majority of tire mold enterprises in China are of the view that, at present, the greatest difficulty it is facing is that “the profitability is not controllable.”
The reason is that after the selling of their products, the mold makers cannot control whether accounts receivable are paid on time, or control how much profit there is for them to make. Because receiving timely payment is difficult, the mold makers can’t have the funds needed to put into new technology and R&D and equipment upgrades.
“To the entire tire industry, the tire mold industry is a small branch industry. It has only accounted for 1% of the complete tire production cost. However, if there are not good molds and dies there would not be good tires at all. We are willing to be the green leaves to bring out the shine of the entire tire industry as the flower.” After such positive comments, Li Qiang, chairman of Shandong Wantong Mould Co. Ltd., also hopes that tire enterprises don’t continue to be in arrears of the payments.
Deputy general manager of Haomai Science and Technology Co. Qiu Xianlu said that the tire and tire mold industries are intertwined “a relationship that is closely related and mutually dependent.”
However, “the delay of the payment by the tire industry to the account receivable of the mold industry can be the constraint for development of the whole industry.” He sincerely wants to change the current unfair trading rules between tire producers and tire mold enterprises.
According to the annual reports of the only two listing corporations in the mold industry, in 2013, Greatoo Inc. had outstanding accounts receivable of $59.52 million, which accounts for 13.22% of its total assets. During the first quarter of 2014, Greatoo accounts receivable increased by $8.96 million.
In 2013, Haomai has achieved sales revenue of $169.60 million, with accounts receivable of $50.40 million, or 12.77% of its total assets. During the first quarter of 2014, Haomai’s accounts receivable has got an increase of $1.34 million.
Based on the situation of the account receivable collection, Qiu Xianlu noted that the best paying tire producers are those with higher demand for its own brand, and good product quality with financial strength and high credit ratings, and the tire enterprises of foreign brands with a good reputation in the business.
There are also tire mold companies doing well in controlling accounts receivable. Tianyang Mold Co. is a typical example. The company is the first to have developed a radial tire mold in China, and was ranked third in 2013 among China tire mold makers.
Last year, the company achieved sales income $67.2 million, but its accounts receivable is only about $3.2 million.
The Tianyang chairman Cai Mufan said that, “it is very difficult for the tire mold industry to survive in the current business environment in China. The payment delay in the mold tire industry is very serious. Some tire enterprises have paid the account receivables at last. However, the time has passed for five years.”
Tianyang is very selective on the customers and pay much attention to the details of the contract. The company only chooses the tire manufacturers with good attitude, that are considered trustworthy, and with good record of the account receivable payments.
Chairman Cai said that Tianyang does not spend a lot of time on the account receivable collections, putting its main focus on making a stronger, specialized and refined tire mold enterprise.
Yinchuan City Tire Exports Rebound
Yinchuan City is an important tire production area in China. Since 2009, the impacts of international trade settlements, product transportation costs, business strategy adjustments and other factors, export sales by Yinchuan City producers has gradually turned into stronger domestic market sales.
Now, with domestic sales continuing to climb up, foreign orders have rebounded recently, mainly with special types of truck tires.
Among the region’s tire producers, Yinchuan Giti Tire Co. Ltd. and Yinchuan Great Wall Giti Tyre Co. Ltd. are the major tire import and export companies in Yinchuan.
In 2013, Yinchuan City exported a total of 219,380 tires with value of $766,000, a year-on-year growth of 58%. These tire products are mainly sold to Yemen, Pakistan, Australia, Philippines, South Korea and other countries and regions.