Hardest Year for Tire Dealers

“Tire Dealers should prepare to challenge tire market’s change. The era of earning on one brand has gone,”said Lei Changchun, General Secretary of Market Commission in China Rubber Industry Association, on the latest China International Rubber Industry EXPO held in Qingdao.

Tireworld: What kind of difficulties are tire dealers facing, especially under pressure of anti-dumping & anti-subsidy investigations and production expansion in China?

Lei Changchun: It is the hardest year for tire dealers in 2014, I think.

Nowadays,most domestic tire dealers have over 100 million yuan of tire inventories, some even have over 300 million yuan of inventories.

Meanwhile, tire price is on down road since 2014. With tire production continuing expansion, heavy inventories will cause deficit in tire dealers in the near future.

Tireworld: With prospective deficit earnings, tire manufactures will give some subsidy to tire dealers as usual, won’t they?

Lei Changchun: Different companies have different policies, but usually give 1 to 3 months of subsidy at most, which couldn’t make up tire dealers’loss.

Actually, tire dealer’s average stock is usually 5 or 6 times of tire producers’ stock, which means they have at least 6 months of stock. That’s why I said the subsidy is a drop in the bucket for the tire dealers.

Tireworld: How long do you think the tire dealers could hold on?

Lei Changchun: It is hard to say. For large-scale of tire dealers, one or two years, I think.

Tireworld: In that case, what should tire dealers do?

Lei Changchun: Obviously, transformation is very important now.

Traditional model (from factory - first-level dealer - secondary-level dealer – retailer) will not exist anymore in the future we can see.

E-commerce has changed Chinese people’s consumption habit, and it is effecting on China’s tire industry.

When tire industry’s e-commerce model forms a scale, it is the time for tire dealers to transform to retailers developing on better service.

Tireworld: How long do you think tire dealers have to finally transfer to tire servicers?

Lei Changchun: I think, it would take a long time to complete the transformation. Traditional model and e-commerce model will co-exist in a long term.

In nowadays, tire manufactures are still deeply depending on tire dealers to digest their production. E-commerce model is still biting a very small piece of the market. Even in EU and America, e-commerce only takes no more than 10% of the market.

In China, we haven’t found a mature e-commerce model to digest such a large stock without tire dealers’help. But that doesn’t mean it won’t happen.