Behind the figures: the future of China's tire industry

Over the past few years, Mr. Wang, a Chinese entrepreneur, has always been wondering how many tire manufacturers there are inChina. He’d ask the question every time when he attended an industry conference, but only till recently did he find a specific figure.

“There’re around 500 tire manufacturing enterprises acrossChina. It might not be necessarily accurate, but this is the first specific figure I’ve ever been told!” Wang told Tireworld, after getting the answer at a recent high-end forum for the rubber industry.

With the rapidly changing marketplace, industry insiders have been sharp in response to every fresh cue from the industry, one of which is a recent list specifying the Top 75 tire manufacturers around the world in 2011, based on their tire manufacturing-related revenues last year.

--China’s Top Four still no match for global tire tycoons

Chinese tire manufacturing enterprises, as the list shows, are gathering momentum, but there’s still a huge gap between them and the world’s leading tiremakers, in terms of production scale and industry concentration.

Besides five enterprises from Chinese Taiwan, there are a total of 26 mainland firms entering the final list, a tad more than last year, including five firms that were newly included in the Top 75 list for 2011. Of the 26 companies, four are in the top 20, namely Hangzhou Zhongce, Triangle Group, Linglong, and Aeolus Tire.

But the four companies’ combined revenues stayed at only 9 billion U.S. dollars for 2011, signaling there’s still a long way to go for them to reach the top levels.

In sharp contrast, the list shows the top 10 tire firms raked in a total of 125.0 billion U.S. dollars in revenues last year, accounting for about two thirds of the global tire market and indicating a noticeably high market concentration rate, which is also consistent with the corporations’ moves to increase investment and expand capacity.

-- To follow the footprints of theUS?

China’s tire industry is big, but not strong. This is a consensus reached by almost all entrepreneurs in the tire industry.

A lot of problems are troubling the industry, such as vulnerable management, over excessive investment and overcapacity, basically the same as the domestic automobile industry is confronted, industry insiders say.

“The domestic tire industry looks much like theU.S.tire industry in the early 20^th century,” held Wang Feng, general manager of Aeolus Tire.

At that time, the tire industry of the United States was in, like, “chaos”, amid extremely fierce market competition with about 120 tire makers providing for some 3,000 automobile enterprises.

After decades of business battle and waves of mergers and acquisitions, the number of tire manufacturers in the U.S. sharply reduced to six to seven in the 1980s, with the auto industry boiled down to only three auto tycoons.

Some market observers noted thatChina’s rubber industry is heading for a new round of reshuffle, in the form of mergers and acquisitions in the near future.

Of the 500 or more domestic tiremakers, only 300 of them have obtained manufacturing licenses, an industry source told Tireworld.

“Under the current market condition, it is possible for these unlicensed enterprises to exist; but the question is how long they could manage to stay and whether the industry could achieve sustainable development,” noted Zhang Shuguo, a senior director with Carlyle Group.

(Contributed by Olivia, olivia@tireworld.com.cn)