**China's Tire Market: A Battle of Giants and Local Players**
The tire industry in China has been facing a wave of challenges, starting with the rising cost of raw materials, which has led to a renewed sense of overcapacity. This year, competition among tire manufacturers has intensified, creating a highly volatile environment.
In 2007, driven by a booming automobile market, domestic tire sales reached 330 million units, marking an 18% increase from the previous year. China now holds the top position globally in tire sales. Experts predict that in 2008, car sales will surpass 10 million units, pushing tire demand to grow by more than 25%.
**Foreign Brands Expand Their Reach**
Major tire producers have not slowed down their expansion plans. Companies like Michelin, Bridgestone, Hankook, Kumho, and Jiatong are targeting a market share of over 20% in China, aiming to capture 80% of the market collectively. This aggressive strategy is leading to fierce competition in the retail sector.
Hankook’s China CEO, Jin Hengtai, announced that the company is entering the economy car segment. Meanwhile, Jean Dominique Senard, CFO of Michelin, emphasized that they are focusing on this growing market. Michelin also plans to double the production capacity of its Shanghai and Shenyang plants. Goodyear, another global player, is expanding its presence through partnerships, such as with the Passat B6 model.
Industry insiders note that manufacturers are engaging in "network wars" to gain market share, as the retail tire market accounts for two-thirds of total sales. Building a strong distribution network has become essential for success.
Goodyear recently launched a national authorized service network in China, aiming to provide one-stop services to consumers. Within six months, it opened 300 franchise stores, averaging nearly two new stores per day. Michelin, with over 300 dealers and 100 new ones added annually, has invested over $400 million in China. Bridgestone, the world's largest tire company to build factories in China, invested 5 billion yuan in a Huizhou plant, signaling its long-term commitment.
Hankook, seeing China as its most important market, has established factories in Jiaxing and Jiangsu. In 2007, it produced 100 million tires in China, marking a new phase of growth. It aims to open 300 franchise stores within five years to compete with other international players.
**Local Companies Struggle to Keep Up**
Despite the opportunities, Chinese tire companies face significant challenges. The six major domestic brands—Wanli, Triangle, Linglong, Luck, BCT, and Haida—only account for 25% of the market. Weak technology, limited funding, and high costs make it difficult for them to compete.
In 2008, rising raw material prices, including steel, have increased production costs. If companies can't pass these costs to consumers, their profit margins could drop significantly. Additionally, the appreciation of the RMB and higher interest rates have further squeezed profits, especially for export-oriented firms.
The tightening monetary policy may also slow down investment in the tire industry, affecting rubber demand. However, some local companies are actively seeking ways to break through.
Over the past few years, Chinese enterprises have boosted production of large tires, easing global shortages. With an annual capacity of 200,000 units, the industry is transitioning from oversized tires to more balanced production. Experts warn against overinvestment but acknowledge the need for sustainable growth.
Some local companies, like South China Tire Corp, are shifting focus from overseas to the domestic market, launching new strategies to gain a stronger foothold. Analysts believe that as more domestic players enter the market, competition in the high-end segment will intensify.
Yan Hongzhen, an industry expert, notes that while foreign brands are still popular, the quality gap between domestic and international tires is narrowing. He believes that changing consumer perceptions requires consistent high-quality products and strong market performance to build trust and support for local brands.
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