Linglong Tire Exploits Mid- and High-end Market: Wang Feng

China’s tire industry confronts severe overcapacity and huge difficulty, the only solution for greater market space is to exploit the mid- and high-end market, said Wang Feng, board chairman of Shandong Linglong Tire Co., Ltd.

Following is the content of a media interview for Wang Feng.

Stable Cash Flow

Media：The asset liability of Linglong Tire has been high. Will this situation be solved along with the company’s IPO?

Wang：Linglong’s asset-liability ratio has decreased from 72.33% in 2013 to 60.41% this year, reaching a standard level. The high ratio was resulted from the company’s large-scale investment for market expansion. A part of the funds raised from the IPO will be used for adding liquidity, so our cash flow is stable.

Moving towards Mid- and High-end Market to Survive

Media: Overcapacity has been a severe issue as well as a great difficulty for the tire industry. What’s your point of view?

Wang: So far, the tire industry indeed confronts a hard time. I think China’s overcapacity is structural overcapacity. A greater part of China’s mid- and high-end tire market is monopolized by foreign brands, so Chinese brands have to build up their own core competence and to make adjustment.

If our own brands are capable of accessing the mid- and high-end market, their future will be promising.

Media: Where is the room for the development of Chinese products in the tire market?

Wang: Rising raw material prices and higher costs on environmental protection are key reasons for rising costs and sliding profits in China’s tire industry.

So far, rubber prices have rebounded and the cost advantage of China’s manufacturing industry is fading away.

Under such circumstances, tire companies should exploit the market deeply, there is no way out in the low-end market, greater market space only exists in the mid- and high-end market.

Profitability is a Systematic Project

Media: How Linglong managed to keep steady profitability in fierce market competition?

Wang: Linglong’s profitability is a systematic project, which involves management value added, improvement in manufacturing efficiency, advance in quality and class of products, and increase in brand value.

In the future, we will focus on advancing the class of products and increasing the value of our brands.

Media: What is Linglong’s inventory and velocity of products？

Wang: Currently, Linglong’s inventory is about 20 days. The velocity of products is different in domestic and overseas markets.

The scheduled velocity for domestic car makers is two to three months, together with the time for logistics, which makes it longer.

In overseas markets, the products will be delivered within 30 days since the date of bills, the time for transport ranges from two weeks to a month, so the velocity is shorter.