At present, nine tyre companies of world’s top 10 tyre makers have manufacturing facilities in the ‘dragon land.’ There are more than 20 tyre units set up with foreign capital, either independent or joint ventures, involving a total investment of $3 billion.
Their market share in Chinese tyre market is an amazing 80% in radial tyres, inclusive of 20% in truck radials and 50% in exports. Let’s have a glimpse into the blooming China tyre spectrum.
Michelin Sets the Trend
The entry of Michelin, the world’s largest tyre maker, into China dates back to 1989 when it opened its office in Beijing. In 1995, Michelin set up four joint-venture tyre plants in collaboration with Shenyang General Rubber Plant. These four plants were merged in 2001, giving birth to Shenyang Michelin Tire Co. Ltd.
In the same year, the company floated Shanghai Michelin Warrior Co. Ltd. with Shanghai Tire & Rubber Group, investing $200 million to expand radial car tyre production lines. The year 2001 saw the establishment of Michelin (China) Investment Co. Ltd. in Shanghai, which built the Tire Research & Development Center for serving the Chinese tyre market.
Bridgestone Shows the Way
Another global tyre giant, Bridgestone, entered China in 1996 when it set up the Shenyang Santai Tire Company with Shenyang No. 3 Rubber Plant, which was christened Bridgestone (Shenyang) Tire Co. Ltd. It started commercial production of radial truck tyres and its capacity was 1 million units in 2004. In the same year, Bridgestone invested $100 million in Shenyang to build a captive wire cord plant, which produces 24,000 tonnes a year.
The company went in for a major expansion in 2000 by buying Tianjin Kumho Tire Co. Ltd. located in Tanjin, at a cost of $94 million and invested another $8 million to raise production to 14,000 passenger car tyres a day.
In 2003, Bridgestone invested US $100 million in Wuxi to set up its third tyre plant in the country to produce 8,000 radial car tyres a day. In 2005, Bridgestone set up its own new synthetic rubber plant in Huizhou, Guangdong.
Goodyear’s JV Experiments
Goodyear was the first to establish a joint-venture tyre plant in China back in 1994 Dalian Goodyear Tire Co. Ltd. with Dalian General Rubber Plant. Today, its output is 2.5 million tyres a year. The company has invested $120 million on doubling of capacity to 5 million units by 2006. Goodyear also set up its own China investment division by locating its Asia investment headquarters in Shanghai.
The Korean Influx
Then, it was the turn of Korean Kumho Co., which set up a joint venture, Nanjing Kumho Tire Co. Ltd., with Nanjing Tire Plant in 1994, followed by another JV, Tianjin Kumho Tire Co. Ltd., with Tianjin Rubber Industry Company in the same year, but was sold off in 1997.
However, Kumho’s unit in Nanjing continues to fare well, and its annual output is 5 million units of radial car tyres. In 2003, Kumho invested $130 million to build a second tyre plant, with an annual production capacity of 5 million units of radial car tyre and 700,000 units of radial truck tyre.
In 2004, Kumho returned to Tianjin investing $300 million to build a new radial passenger car tyre plant with an annual output 12 million units. Kumho is also planning to invest $150 million to build its third tyre plant in Changchun radial car tyres. The first phase of the project is expected to be commissioned in 2007. The total tyre production capacity of Kumho is estimated to touch 25 million units by 2007-2008.
It was in 1999 that Korean Hankook Tire Co. entered China by setting up a joint-venture company named Jiangsu Hankook Tire Co. Ltd. with Qingjiang Rubber Plant at a cost of $91.88 million. Its daily output is 4,200 tyres. In addition, Hankook established a wholly owned subsidiary, Jiaxing Hankook Tire Co. Ltd., in Zhejiang.
The US Entry
The US tyre major Cooper Tire & Rubber Co. had a late entry into China, by setting up a joint-venture tyre plant with Taiwan Kenda Rubber Industrial Co. Ltd. in Kunshan, Jiangsu, in 2004. The investment was $200 million, with an initial annual capacity of 10 million units. Once the second phase is commissioned, the total capacity will be 20 million tyres a year.
Last year, Cooper bought 51% shares of Shandong Chengshan Tire Co. Ltd. and changed the name to Cooper Chengshan Tire Co. Ltd. The US tyre major invested $400 million to raise the annual capacity of 6 million to 8 million passenger tyres. It is estimated that the annual sales turnover of the plant will reach $500 million.
The Advent of the Japanese
Japanese Yokohama Rubber Co. Ltd. was another late entrant into the country. In 2002, it set up its first JV to produce passenger tyres in Hangzhou with Hangzhou Rubber Group. The capacity was raised to 1.4 million units from 700,000 units by 2004. In 2005, the Japanese tyre major invested 50 million yuan to build a truck tyre production line in this plant. In April 2006, Yokohama announced its plans for a fully owned unit named Suzhou Yokohama Tire Co. Ltd. in Suzhou city of Jiangsu province. Scheduled to go on stream in October 2007, the new plant will manufacture radial truck/bus tyres with a planned annual production of 350,000 units.
The year 2002 also saw the entry of the Japanese tyre maker, Japanese Sumitomo Rubber Industries Ltd., which invested $60 million to set up an wholly owned radial passenger tyre plant in Changshu, Jiangsu, Sumitomo (Changshu) Rubber Co. Ltd. After having gone on stream in 2003, its daily output rose up to 7,500 units in 2005 from 1,600 units initially and is targeted to touch 10,000 units this year. Sumitomo (Suzhou) Rubber Co. is the tyre trading division of Sumitomo, which is also planning to have a third tyre plant in the country.
The European Wait
The European tyre giants are waiting on the wings. In fact, Germany’s Continental AG is closely watching the Chinese scenario and is waiting for the opportune moment to set up a tyre plant in the country. The company, which already has its Asia-Pacific investment headquarters in Shanghai, is planning to double its tyre sales volume in the Asia-Pacific region in five years to one billion euros by 2010.
The Italian Connection
The Italian connection with the Chinese tyre industry dates back to the 1980s, when Pirelli S.P.A. exported radial tire technology to several Chinese tyre makers. In 2005, Pirelli chose Shandong Lutong Tire Company to set up a joint venture company in China to make 1.2 million truck tyres, 10 million passenger car tyres and 10 million tonnes of tyre cord. China will be its largest tyre production base once the project goes on full stream.
The Indonesian Forays
The Indonesian tyre major Grandtour entered China in 1993 by first signing a joint venture agreement with Anhui Tire Factory to produce bias angle tyre and later setting up a passenger car tire production line in Anhui. The JV became a wholly owned subsidiary of Grandtour eventually under the name Anhui Grandtour Tire Company. In addition, Grandtour built a new nylon cord factory for the tire plant.
In 2001, Grandtour bought the truck tyre production line of Anhui Tire Plant and Anhui Kaiyuan Tire Plant. It later merged with Anhui Grandtour Tire Company.
In 1996 Grandtour set up its wholly owned Fujian Grandtour Tire Company to produce passenger car radial tyres in Putian, Fujian. By 2004-end, the unit’s capacity touched 3,000 truck tyres.
In 2002, Grandtour bought Chongqing Zhongce Tire Company and Chongqing Tire Plant, to set up the Chongqing Grandtour Tire Company and later acquired Yinchuan Zhongce Rubber Company to set up a JV named Yinchuan Grandtour Tire Company with Yinchuan Rubber Factory. Grandtour invested 980 million yuan in the first phase to enlarge radial truck tyre capacity from 300,000 units to 600,000 units.
In the second phase, the Indonesian major is planning to build another radial truck tyre production line of 900,000 units capacity, which is expected to touch 1.5 million units in the final phase. In 2004, Grandtour invested 1 billion yuan to build a new tyre plant to produce light truck tyres of 10 million units capacity. The construction is on, and the plant is scheduled to be operational later this year.
In 2003, Grandtour bought the state-owned stocks (44%) of Hualin Tyre Plant at an investment of 97.89 million yuan to set up the Hualin Grandtour Tire Company. The next year, Grandtour bought Hubei Wire factory to produce wire cord for its tyre production. The year 1998 saw Grandtour setting up its sales headquarters in Shanghai. By 2004, the company had a total of five tyre production bases in China.
Taiwanese, Malaysian Ventures
The Taiwan Kenda Rubber Industry Co. Ltd., which invested US $30 million to open Kenda Rubber (S.Z) Co. Ltd., in Shenzhen to produce bicycle tyre & tube and industrial tyres, opened another plant, Kenda Rubber (China) Co. Ltd., in 1994 to produce industrial tyres.
Taiwan Nankang Rubber Tire Corp. set up Nankang (Zhangjiagang) Tire Co. Ltd. to make bias tyre and radial car tyres.
Taiwan Federal Tire Corporation bought Jiangxi Rubber Plant Tire branch in 1997 and invested 9.5 million US dollars to open own plant, Jiangxi Federal Tire Co. Ltd., to produce bias tyres and radial car tyres.
Taiwan Hwa Fang Rubber Industry Co. Ltd., invested US $30 million to establish Hwa Fang Rubber (China) Co. Ltd. in Changshu, Jiangsu, in 1993 to produce industrial tyres and radial passenger tyres. In 2003, Hwa Fang to opened the second plant.
Taiwan Anchors Rubber Industry Co. Ltd. set up Anchors (Zhangjiagang) Rubber Industry Co. Ltd. in Zhangjiagang in 1995. The annual output was 15 million units of IIR tube and 7 million units of truck/bus tire.
In 1993, the Taiwanese tyre major, Cheng Shin Rubber, set up Kunshan Cheng Shin Tire Co. Ltd., in Kunshn, Jiangsu.
Malaysia joined the bandwagon in 1993 when the Golden Lion Group built a joint venture company with Hubei Dongfeng Tire Plant to start Dongfeng Golden Lion Tire Co. Ltd. In 2004, the JV was disbanded and taken over by the Double Star Group, leading to the birth of Double Star Dongfeng Tire Co. Ltd. After disassociating with the Dong Feng Tire Co., Golden Lion Group established Shandong Galaxy Rubber & Tire Co. Ltd. with Shandong Luhe Group. The company expects its annual output to touch 10 million units by 2012.