Liwang Tyre closed down for loan default

Liwang Tyre Co., a tire maker based in Zhejiang province of southeast China, was closed down by the local court for defaulting loans of 50 million yuan.

The tire maker will be auctioned.

Accordingly, the number of tire makers in China has reduced by 10 every year in the past few years. Industry insiders expect quite many tire manufacturers to disappear in the coming few years.

Competition with “price wars” among medium and low manufacturers is one of the major reasons for the bankruptcy in the industry.

The majority of tire manufacturers cannot get rid of “price wars” although they know well the harm of vicious competition.

Some manufacturers say they are forced to “meet an enemy attack” in order to survive.

Also, the low threshold of the industry has intensified the “price wars.”

In the past few years, green tires have become the mainstream as the Chinese government has strengthened efforts on environment protection.

“Eliminating production capacities” is the common goal of all levels of governments in China, forcing the manufacturers to transform and upgrade.

This is both opportunity and challenge to Chinese tire manufacturers.

The major tire manufacturers, with large-scale equipment, have to put in more investments in the green transformation.

In contrast, the smaller manufacturers, which are more flexible in the transformation and upgrading, can adjust their product mix more quickly with a smaller investment.

For instance, the small and midsize manufacturers can change patterns and formula and develop special types of tires to avoid homogeneous competition, an expert said.