Guizhou Tyre's shareholders vote against building Vietnam factory

Guizhou Tyre Co., Ltd. planned to invest 1.67 billion yuan in Vietnam to establish an all-steel radial tire factory with annual output of 1.2 million tires.

At the board meeting, around 25% attendees voted against the proposal, excluding the company’s own equity.

Evading U.S. anti-dumping & anti-subsidy probes

An industry insider said Guizhou Tyre may imitate Sailun Jinyu Group to evade the U.S. anti-dumping and anti-subsidy investigations against off-the-road tires from China.

The U.S. Department of Commerce unveiled the results of the final ruling over the anti-dumping and anti-subsidy appeal against OTR tires from China.

The anti-dumping tax rate for Guizhou Tyre rose from 11.41% to 105.31%, while the anti-subsidy rate from 2.52% to 34.46%.

In contrast, Sailun Jinyu established a factory in Vietnam in 2012 and transited all its OTR business there. Its anti-dumping rate was adjusted down from 210.48% to 33.08%, and the anti-subsidy rate was 5.65%.

Guizhou Tyre exported OTR tires valued about 51 million dollars (about 346 million yuan) to the U.S. in 2016, accounting for 6.3% of the producer’s operating revenue.

Constraint of state-owned enterprise

Guizhou Tyre is a state-owned enterprise, in which Guiyang Industry Investment (Group) Co., Ltd. holds a 25.33% stake.

A senior expert said as an SOE as Guizhou Tyre, its management pattern may hard to accustom to overseas development.

What’s more, the weighted average return on net assets of Guizhou Tyre was the worst among all listed tire producers for two consecutive years.

Excluding the housing compensation of 360 million yuan and non-recurring items, the tire producer’s net loss in 2016 was 272 million yuan.

Interrupted by external factors

According to the proposal submitted at the board meeting, construction of the Vietnam factory of Guizhou Tyre will take 12 months.

A source disclosed that the factory might be affected by external factors.

Considering the U.S. trade protectionism, if tires imported from Southeast Asia surge, it is very likely to launch anti-dumping investigation against this region.

If so, Guizhou Tyre will face another disaster.

In addition, although the foreign exchange management in Vietnam is flexible, and the conditions for applying foreign exchange loans are loose, whether these will change in the coming years are unknown.