China’s tire firm going global is wise choice

Qingdao Doublestar and the creditors group of Kumho Tire leading by Korea Development Bank reached an agreement in early Mar., and the Chinese tire company will hold a 45% stake in Kumho Tire in terms of increase of capital and become the controlling shareholder.

After the transaction, Doublestar will make use of Kumho Tire’s advantages and brand and make efforts to become a leading international enterprise as soon as possible.

The capital increase is about 4 billion yuan and the delivery is expected to be completed in the third quarter of this year.

Tire producers actively “going global”

Over the past few years, China’s tire enterprises actively went global and enhanced overseas market exploitation, especially in Southeast Asia.

Most Chinese tire enterprises took Southeast Asia as the first choice to make investment and to build plants, thanks to quality natural rubber in the localities, low production costs and friendly investment environment.

Shandong Wanda Boto Tire inked a memorandum with Malaysian government in 2017 to invest and build a tire plant in Malacca to produce high-end tires.

Guizhou Tyre decided to invest 1.67 billion yuan in Vietnam in May 2017 to construct a tire plant with annual capacity of 1.2 million all-steel radial tires.

As Chinese authority strengthened environmental protection inspection, reduced preferential policy, and production costs increased, the tire enterprises are confronting increasingly heavy pressure.

However, the overseas exploitation of Chinese tire enterprises is not so smooth.

Frequent anti-dumping and anti-subsidy probes

Tire export is one of Chinese tire enterprises’ main means for making profits, standing at over 40%, said Li Xu, an analyst with Chem365.net. however, frequent antidumping and anti-subsidy probes severely impacted small- and medium-sized tire enterprises.

Chinese tires were frequently investigated by the Europe and the US for antidumping and anti-subsidy reasons, especially by the US in the past few years, said Bai Ming, deputy director of the International Market Study Department of the Ministry of Commerce.

Take 2017 as an example, EU, Turkey, Peru all announced to launch anti-dumping probes against tires imported from China. EU said in Oct. to launch anti-subsidy investigation against bus and truck tires imported from China.

The US and EU also raised the requirements for accessing their markets.

An industry insider said the greatest difficulty for Chinese tire exporters is the criteria of certification. Meeting criterion of these countries means producers should raise production cost and add testing cost.

To address the issue, Chinese tire sector should cut outdated capacity, build up their own brands, lower production costs through intelligent manufacturing means, and develop new products.

Occupy advantageous position in the game

Intelligent manufacturing and green tire industry should be integrated.

Developing intelligent manufacturing has become the trend for upgrade of traditional industries. Green tire is an effective means to enhance product competitiveness of an enterprise.

From building plants overseas to building plants in the importers' countries is a wise choice.

China's tire enterprises have to integrate global resources and channels, and to expand production and market size to realize real development. Building overseas plants will help them avoid the impacts of international trade barriers on tire export and pave way to overseas market exploitation.