◎ Zhang Minmin

According to the statistics, at present, 14 tire enterprises are laying out capacity overseas, which are respectively ZC Rubber, Linglong Tire, Sailun Tire, Sentury Tire, Doublecoin Group, Prinx Chengshan, General Science Technology, Triangle Tire, Guizhou Tyre, Double Star Tire, Chaoyang Longmarch, QINGDAO FULLRUN TYRE, Zhaoqing Junhong and Roadbot.

Southeast Asia possesses over 70% of the natural rubber resources in the world, which is attractive to China’s tire enterprises in the aspects of raw materials, logistics, labor cost and policy of inviting outside investment, followed by the countries in Europe and America as well as the countries along the “Belt and Road”, such as Pakistan and African countries.

I. Listed Tire Companies having laid out Overseas Factory

1. Sailun Tire

Sailun is the first China’s tire enterprise to build a factory overseas. Its Vietnamese factory was built and put into production in 2013, and its annual production capacity of semi-steel tire at the end of 2017 reached 10 million units, the project with an annual production capacity of 1.20 million all-steel tires/year officially reached the design capacity and contributed profit in 2018, and the project with an annual production capacity of 50000 tons of off-the-road tires reached the design capacity in 2019.

2. Linglong Tire

Linglong Tire started to build its first factory in Thailand from 2012, the first high-performance semi-steel radial tire of Linglong Thailand Company was successfully produced on January 16, 2014, the all-steel radial tire project was put into production in May 2015, and therefore it became the first China’s tire enterprise to build a factory in Thailand.

3. ZC Rubber

On May 25, 2015, the first passenger car tire of ZC Rubber Thailand Factory was produced; on September 24, 2018, its first all-steel OTR was produced. After three years, ZC Rubber Thailand Factory has developed to be a large-scale modern factory; with its products sold to Southeast Asia, Russia, Turkey, South America, America, etc., it has become the most important production base for tire export of ZC Rubber.

4. Sentury Tire

The first overseas tire factory of Sentury Tire was completed and put into production in Thailand Lisheng Industrial Park on August 23, 2015, with a total investment of USD 400 Million, its scale is annual production capacity of 12 million high-performance semi-steel radial tires. Relying on the most advanced automatic production and testing system, it realized automatic production from raw materials, mixing, parts, building, vulcanization, testing to warehousing to become an advanced 4.0 factory in the world, with the number of the employees as only 470.

5. Double Star Tire

In 2015, Double Star Tire contributed about USD 30.25 Million in the form of becoming a shareholder with the equipment to possess 27.5% equity of the joint venture and build a production base in Kazakhstan.

In July 2018, Double Star formally became the holding company of KUMHO TIRE, by advantage of 8 production bases and 5 R&D centers of KUMHO TIRE in the world, the overseas production capacity of Double Star continued to expand.

6. Doublecoin Tire

Doublecoin Thailand Factory is jointly invested and built by Tribeca, a subsidiary company of Huatai Rubber, Huayi Group and LK-RICH Estate as the founders, with a total investment of about USD 285 Million; located in Rayong Province, Thailand, it is built fully according to the standard of Industry 4.0 intelligent factory, with its automation degree leading in the industry.

Doublecoin Thailand Factory started its production in July 2017 and reached the rated annual capacity of 1.50 million radial tires for trucks and 50000 OTR. In April 2018, the tires produced by Doublecoin Thailand Factory started to be exported to America.

Therefore, it can be seen that several tire enterprises having early planning in overseas capacity layout take the way of “developing” overseas to avoid the trade barrier which has become normal but become increasingly fierce, lower the trade risk and reap the benefits brought about by release of overseas capacity early.

II. New Craze of Building Factories Overseas has Set Off

1. General Science Technology

On January 9, 2020, General Rubber (Thailand) Co., Ltd. held the opening ceremony in Thailand Rayong Industrial Park. General Science Technology (Thailand) Project was established in October 2018, with a total investment of USD 300 Million, to build the first overseas production base in Thailand. It obtained the Construction Permit in January 2019, enjoyed the preferential tax policy of Thailand BOI “8 exemptions and 3 halves” in April, the main plant was capped and the equipment was installed at the end of August, it was successfully put into trial production on December 28, 2019, after completion, it will possess the annual production capacity of 1 million all-steel radial tires and 6 million semi-steel radial tires. According to the information, General Science Technology (Thailand) will invest on the second phase to realize scale dou-bling.

2. Sailun Group

On November 18, 2019, ACTR Tire Company, a joint venture established by Sailun Group and Cooper Company, was officially opened in Tay Ninh Province, Vietnam. This company started its production on March 1, 2019, produced its first tire in October, and was officially put into production in November, with the construction cycle as only 8 months.

3. Chaoyang Longmarch

On November 18, 2019, Chaoyang Longmarch Tire Co., Ltd. signed a joint venture agreement with Service Industries Ltd., a tire manufacturer in Pakistan, in Lahore City, Pakistan to produce radial tires for trucks and passenger cars in Pakistan, Longmarch Tire will possess 49% of the shares. With a planned total investment of USD 250 Million and the investment of the first phase as USD 100 Million, the project will be located in Sindh Province, Pakistan. After the Phase I project with an annual production capacity of 600000 tires is put into production, both parties will continue to carry out Phase II project to realize the annual production capacity of 1.20 million units; if the project operation meets expectation, the Phase III project will be continued to be implemented to realize an annual production capacity of 2.40 million tires finally.

4. Guizhou Tyre

On November 12, 2019, the signing ceremony of Guizhou Tyre Vietnam Factory Project was held. The new Vietnam Factory of Guizhou Tyre was located in Longjiang Industrial Park, Tien Giang Province, Vietnam, with a total investment of USD 400 Million, a planned total floor area of about 301 mu and a total building area of about 137300m2. The project will be implemented in three phases: The first phase is the project with an annual production capacity of 1.20 million all-steel radial tires, the second phase is the project with an an-nual production capacity of 2 million all-steel truck tires and special tires, and the third phase is the project of rubber processing. On December 30, Guizhou Tyre and its Vietnam Company signed an equipment purchase contract with a total amount of about 213 Million Yuan with Saixiang Technology to purchase one-off forming machine products for all-steel truck radial tires, which were predicted to be delivered successively from the second quarter to the fourth quarter in 2020.

5. Double Star Group

On November 13, 2019, Double Star Group signed a joint venture agreement with Pakistan MSD Tire and Rubber Company and Dayu Pakistan Bus Service Co., Ltd. in the Office of Prime Minister, Islambad, Pakistan, three parties will establish a joint venture to build a factory with an annual production capacity of 7 million radial tires in Pakistan, which was planned to be put into production at the end of 2021, it will become the largest tire enterprises in Pakistan after its completion.

6. Sentury Tire

On September 6, 2019, Sentury publicized its plan of expanding Thailand factory for the first time on 2019 Strategic Conference of New Products. Sentury plans to build an intelligent factory near the original Thailand factory to make the total production capacity of Sentury Thailand Factory to be about 18 million tires/year. In addition, the media reported in 2016 that Sentury planned to invest USD 530 Million in Georgia, the U.S. to build a factory with an annual production capacity of 12 million semi-steel radial tires. However, there is no new progress at present.

7. Zhaoqing Junhong

On June 15, 2019, Maxtrek, a subsidiary of Zhaoqing Junhong Corporation Limited, began construction in Malaysia-China Kuantan Industrial Park to produce tires for passenger cars and trucks and buses. This factory is the first factory of Maxtrek overseas, with an annual production capacity of 6 million tires for passenger cars and light trucks and 500000 tires for buses and trucks.

8. Linglong Tire

On March 30, 2019, the factory with an annual production capacity of 13.62 million high-performance radial tires invested by Linglong Tire with USD 990 Million in Serbia was officially commenced. This is the second factory of Linglong Tire overseas as well as the largest project with direct foreign investment in Serbia so far. It becomes the 6th production base initiated following the bases in Zhaoyuan, Dezhou, Liuzhou, Jingmen in China and Thailand production base.

9. Prinx Chengshan

On March 31, 2019, new factory of Prinx Chengshan in Thailand held the foundation stone laying ceremony in Thailand East Coast Industrial Park. With a floor area of about 480000m2, the project plans to invest nearly USD 300 Million for construction of the infrastructure and the production line with an annual capacity of 4 million PCR and 800000 TBR, and it is planned to be put into production in the mid-2020. Thailand Factory is built according to the standard of green intelligent tire factory, with the simulation technology applied to various aspects such as factory planning, equipment optimization and production logistics. After its completion, the production efficiency will be improved by 20%, production cycle will be shortened by 20%, work efficiency will be increased by 40% and the waste of raw materials will be reduced by 80%.

10. Roadbot

In July 2018, Roadbot, JOCIC and UAE government signed a tripartite agreement to take Roadbot Abu Dhabi Tire Project as No. 1 investment project of Sino-UAE Capacity Cooperation Demonstration Park, which gained close attention and vigorous support from the governments of both countries. On December 10, 2018, Roadbot Abu Dhabi Tire Project was commenced; on January 22, 2019, His Excellency Sultan, Minister of State of UAE and chairman of Abu Dhabi Port, laid the foundation for the project in person.

11. Triangle Tire

On April 22, 2018, Triangle Tire officially initiated its American Factory Project. This is the first production base invested and built by Triangle Tire overseas. Located in Edgecombe County, North Carolina, the U.S., with a total investment of USD 580 Million, it plans to build a factory with an annual capacity of 5 million high-performance radial tires for passenger cars and 1 million radial tires for commercial vehicles; with the investment as about USD 298 Million and USD 282 Million respectively, it is predicted to be completed in 2023.

12. QINGDAO FULLRUN TYRE

In 2016, QINGDAO FULLRUN TYRE built a factory in Selangor, Malaysia, it invested USD 100 Million in total to build a factory with an annual capacity of 600000 all-steel tires and 3 million semi-steel tires, and the factory is planned to be put into production in the first half year of 2019.

III. The Opportunities and Risks of Building Factories Overseas Co-exist

At present, in China, the tire capacity is excessive, the environmental protection monitoring is reinforced and the cost pressure of the tire enterprises such as labor, environmental protection, safety and resources becomes larger and larger. Therefore, to avoid the trade risks, further optimize the industrial layout of the tire enterprises in the world and accelerate the expansion of global market, the tire enterprises accelerate the speed of going out. Meanwhile, low labor cost, raw materials and tax preference also attract the tire enterprises to build factories overseas.

Under the context of “high-end manufacturing industry + artificial intelligence”, release of overseas production capacity of tire enterprises wins the capital for industrial upgrading of domestic companies and makes domestic companies focus on technological innovation, product structure adjustment and brand value improvement.

However, despite of it, building factories overseas also has many risks, which the tire enterprises must pay attention to.

1. The U.S.

Although investing to build factories in the U.S. has its advantages, high labor cost of the U.S. can not be avoided. In 2016, the labor cost of manufacturing industry in the U.S. was USD 39/hour while that in China was only USD 5/hour. According to the prediction of The Economist, in 2021, the labor cost in the U.S. will rise to be USD 45/hour.

Some experts expressed that in the past, the U.S. enterprises would provide the workers with life-long insurance, and even reimburse the medical expenses for the dependents, thus many enterprises could not afford it. For this, the Japanese enterprises in the U.S. generally avoided too high enterprise burden by the way of commercial insurance; in addition, the factory must improve the automation degree to reduce the amount of labor used.

2. Vietnam

The enterprises choose to build factories in Southeast Asian countries such as Thailand and Vietnam mainly to solve the disadvantage of being away from raw material supply market and product export market, and avoid the influence of “Double Anti” of the U.S. from the source, however, sharp rise in the amount of tires exported by Southeast Asian countries to the U.S. draws the attention of the U.S. 

In the first quarter of 2019, Vietnam is one of the countries with the fastest growth in the U.S.’s import from Asia, the latest data of relevant departments in the U.S. shows that, in the first quarter, the export of Vietnam to the U.S. increased by 40.2%. If the growth in the export of Vietnam to the U.S. keeps such a speed, it may exceed Italy, France, Britain and India to become one of the largest countries of origin of the U.S. Although evidences indicate that such growth is partially caused by adjustment of supply chain, the analysts doubt how much recent growth is legal.

On June 27, when being interviewed by the Fox on Sino-US trade friction issue, Trump, the president of the U.S., stated that Vietnam “gained more extra advantage by unfair means from the U.S.” than China. When answering the question about “some American companies moved their factories from China but moved to Vietnam under the influence of tariff”, Trump expressed that: “Although Vietnam is smaller than China, it is almost one of the worst among all the countries”. The outside world successively guessed whether the U.S. would impose additional tariff on Vietnam.

It is learned that the U.S. will impose double high tax on the enterprises exporting to the U.S. through Vietnam. Vietnam Customs made a statement on June 9, stating that it discovered dozes of cases where Chinese products avoided the tariff imposed by the U.S. on them through the activity of “forgery of the country of origin” and “illegal transshipment” during the duration of Sino-US trade friction. Vietnam Customs stated that it would investigate strictly and punish heavily such behaviors.

3. Thailand

In June 2019, Thai authorities carried out investigation on the Chinese-funded enterprises exporting to the U.S. which invested to build factories in Thailand to ensure that the commodities produced by these factories were produced in Thailand instead of being imported from China so as to avoid new high tariff of the U.S.

All in all, building factories overseas is not once for all, without additional worries. When choosing overseas layout, the tires enterprises shall maintain a prudent attitude, pay attention to the change of international situation, be familiar with the local legal system and envisage the local business environment; meanwhile, the enterprises shall carry out domestic brand upgrading strategy simultaneously, constantly improve the product quality, accelerate the internationalization progress and constantly improve the modern enterprises management ability to step towards first-rate tire enterprises in the world. Only by constantly improving their anti-risk ability can the enterprises stand in the forefront and achieve greater development in the new era.