◎ Hao Zhangcheng

The world is facing a major change that has never been seen in the past 100 years. Since the “13th Five-Year Plan”, the pursuit and promotion of high-quality development has become the theme of dominant enterprises in industries. The industrial base of China’s rubber industry entering the international competition has been further consolidated.

Rubber Industry Maintaining Low Growth Trend

Since 2019, the external environment has been complicated and severe, and the internal environment is full of difficulties and challenges. The consumption of rubber industry in China, represented by tire products, was generally not strong. The producing and marketing of automobile declined. According to statistics of China Association of Automobile Manufacturers, the auto sales of 2018 decreased by 2.8% year-on-year (the same below), the sales volume of the first three quarters of this year decreased further to 10.3%, and tire matching decreased somewhat; domestic economic structure and transportation structure of “conversion of highway transport to railway transport and to waterway transport” changed, and new changes were brought to market demand and value increase of tire replacement; the problem of oversupply in domestic demand of tires became stricter, and tire prices were difficult to rise.

Deng Yali said that although difficulties in production and operation increase and downward pressure on economy is great, the tire industry enterprises have overcome the difficulties and the quality of development has been improved.

The latest statistics from CRIA show that in the first three quarters of this year, the current industrial output value of tire industry increased by 1.64%, sales revenue increased by 1.33%, and integrated cover tire production increased by 2.66%.

Despite this, the market pressure remained high. Reflected in inventory of finished products, the inventory amount increased by 8.73%, which is a record high. The actual profitability was not as good as reported, and the profit growth was 10 percentage points lower than that of the same period last year.

In terms of tire exports, the proportion of major export market of the United States is gradually decreasing. According to Xu Wenying, vice president and secretary general of CRIA, in the first half of this year, under the circumstances of Sino-US trade friction and “anti-dumping and anti-bribery” sanctions, China exported 2.47 million car tires to the United States, a drop of 55.3%, and the export delivery value was USD 82 Million, only 10% of that of 2014 (USD 1,714 Million); the export of truck and bus tires was 7.28 million, down 31.49%, and the export delivery value was USD 390 Million, only 42% of that of 2014 (USD 1,850 Million).

Fortunately, China’s tire enterprises actively expand emerging markets. In the first three quarters, the export still maintained a reasonable increase. The export delivery amount increased by 7.61%, and the export delivery value increased by 3.31%.

The business data of Zhongce Rubber Group, which ranks the first in China’s tire enterprises, can confirm the current domestic and international economic conditions from the individual to the universal. Ge Guorong, deputy general manager of the company, revealed that Zhongce Rubber achieved operating income of 21.067 Billion Yuan in the first three quarters, an increase of 5.13%. Thereinto, the domestic sales income was 12.6 Billion Yuan, which was flat year-on-year; the export delivery value was 8.469 Billion Yuan, a substantial increase of 16.26%.

However, a piece of bad news came from the export market during the meeting: on October 10, the Egyptian Ministry of Trade and Industry decided to launch an anti-dumping investigation against the truck and bus tires (TBR) originating in China, Thailand, India and Indonesia, and accused Chinese enterprises of dumping up to 75%.

Worst Stage of Economy must being Fundamentally Reformed

“The weakening situation of global economy is relatively obvious. It is currently the worst stage of economy since 2008 financial crisis. There are fewer and fewer controllable aspects for enterprises, and the influence of objective factors is getting bigger and bigger,” Wang Feng, chairman and president of Shandong Linglong Tire Co., Ltd. gave his own judgment on the current global economic situation. The actual situation is indeed the same, indicating that the prosperity index of manufacturing industry is still declining.

On October 15, the International Monetary Fund (IMF) predicted that the global real economic growth rate would be 3.0% in 2019, 0.2 percentage points lower than forecasted in July, and the growth rate would fall to the lowest level in recent ten years since the financial crisis.

On October 31, the China Federation of Logistics & Purchasing and the National Bureau of Statistics of China jointly released data, announcing that in October, the purchasing managers’ index (PMI) of China’s manufacturing industry was 49.3%, 0.5 percentage points lower than that of September, and the lowest level since the second quarter of this year. At the same time, it is also the sixth consecutive month below the threshold.

In automobile industry, which is closely watched by the tire industry, the production and sales volume of China’s automobile market in September experienced year-on-year decrease for 15 consecutive months. Two experts from automobile industry believe that car promotion policies which last for more than two years has overdrafted automobile consumption in advance, resulting in negative growth in automobile production and sales in the past year. “Has the annual sales volume of China’s automobile market already reached the peak?” Xu Haidong, assistant secretary-general of the China Association of Automobile Manufacturers, believed that the favorable factors for stimulating and promoting the consumption of new cars still exist. It is predicted that the growth of China’s automobile demand will slow down in the next three years, and the production and sales of automobiles will go out of a wave of L-shaped trend in the current state. Zeng Zhiling, general manager of LMC Automotive Consulting (Shanghai) Co., Ltd., has a vision for the next five years: China’s automobile production and sales will continue to move from negative to positive and will achieve a growth path of up to 5%. Although answer one gives a “trend” and another gives a “value”, it is exactly the same.

Look back to the rubber industry. Deng Yali pointed out that the 70-year development process of rubber industry, especially the process of change from quantitative change to qualitative change since the 20th century, fully proves that “development is coming in the process of overcoming difficulties and facing challenges.” Currently, the entire rubber industry still has many major challenges, for example, operating costs are on the rise, economic benefits of enterprises are further declining; structural overcapacity is prominent, homogenization competition is intensified, price war is unstoppable, spreading from home to abroad; innovation and R&D abilities are not strong, and quality, brand competitiveness is not strong compared with the world-class enterprises, and so on.

“When economic situation is good, everyone has its own way. When economic situation is not good, if we only focus on price competition, even if we go abroad to build factories in Southeast Asia, the further road for Chinese tire enterprises will become narrower and narrower, and there will be more and more trade barriers against us in foreign countries,” Wang Feng is worried about the future of the industry, “The more the economy is not good, the more it is necessary to reform and solve problems from the roots.”

Zuo Xiaolei, researcher at the Financial Center of Counselor’s Office of the State Council, believed that the world economy is facing major adjustments and China’s economy has entered a new pattern of high-quality transformation. The rubber industry should actively integrate into the restructuring of international industrial specialization. In the future, China will surely make new breakthroughs in quality, brand and technology. “This is the confidence brought to us by the 70 years of development since the founding of China, especially the 40 years of development since the reform and opening up.”

High-quality Development Needing Focuses on Both Innovation and High-end Orientation

Since the “13th Five-Year Plan”, industry-leading enterprises take the pursuit and promotion of high-quality development as the theme. Zhongce Rubber promotes the high-quality development of enterprise through digital technology, and brings the value of silent data to the extreme. Zhongce ET Industrial Brain performs deep calculation and analysis on various types of data at the production side, and gives a combination of solutions for optimal utilization of resources. For example, through the parameter ratio, the processing performance of rubber compound can be more stable, and the qualified rate of rubber compound is increased by 3~5 percentage points. The contribution to the sales side is to achieve data driven through data accumulation, analysis and application, to provide consumers with better products and services, to acquire new growth driver, and to realize new value. Sailun Group and China Telecom Group carry out strategic cooperation on 5G Industrial Internet Labs, and take the lead in exploring new-generation information technologies such as 5G, artificial intelligence, big data, cloud computing, etc. to apply in tire enterprises.

More and more enterprises in rubber industry have improved the intelligence level of R&D, manufacturing, operation and management, and intelligence degree of product through informationalized and intelligent construction and transformation, marching into high-end products and industrial chains. The technical level, production efficiency, quality uniformity, energy consumption, and exhaust emission control have been greatly improved, and labor employment has fallen sharply.

More importantly, the investment in technology of rubber enterprises continues to grow, and new product development and product testing methods are approaching perfection day by day.

Wang Feng believed that in order to achieve high-quality development, Chinese tire enterprises firstly must take a high-end route and work hard to form a cooperative relationship with mid- to high-end automobile brands that account for more than 60% of the domestic market. “After more than 10 years of rapid development, we have already possessed such strength, and the entire social and economic environment has created such conditions.” Secondly, they must further increase investment in innovation and research & development. “The last part of an endeavor is the hard-est to finish. China’s tire industry is incomplete without supporting tire testing ground.”

To this end, Linglong Group invested about 1.2 Billion Yuan to build China’s first tire testing ground with an area of more than 2,200 mu and a world standard. It can meet the needs of tire legislation certification test and product R&D test, achieving synchronous R&D with automobile industry, and changing the situation that foreign-funded enterprises play a “leading role” in the original tire market. Third parties with international qualifications and experience are responsible for operational management, and the independence and authority are beyond doubt.

Huang Guozhong, deputy director of the National Engineering Research Center for Rubber and Tire, pointed out that supporting is a key part of building tire brand, and entering the international OEM supporting system is the only way to enhance self-own brand. This requires enterprises to practice their internal strengths, realize the innovative development from imitation to target design, and form a strong OE R&D team to achieve the market effect with international OEM supporting. Only in this way can self-owned tire brand achieve a breakthrough from big to strong.

Enterprises in the industry will achieve high-quality development through transformation and upgrading, transition with traditional growth drivers being replaced by new ones, and control & elimination of low- and medium-grade backward production capacity. It is learned that since the “13th Five-Year Plan”, the tires have eliminated about 40 million backward production capacities. Some “national important equipment” and domestic high-class cars have applied domestic products, effectively preventing international monopoly and realizing import substitution.

Xu Wenying reminded enterprises that they should not only focus on the export market, but also pay attention to imported high value-added products. “The price of some rubber products for automobiles is hundreds of times more than ours. Why not get in touch with these importing enterprises, and engage in cooperative R&D to achieve import substitution?”

Some superior enterprises “go global” and release the vitality of the industry through economic globalization. The production capacity of Thai tire factories such as Linglong, Zhongce, Sailun, Double Coin, Sentury, etc. showed strong growth in double digits, and achieved various effects of expanding new markets, avoiding trade frictions and enhancing global competitiveness. Overseas projects such as Prinx Chengshan, Jiangsu General, Triangle Tyre, Guizhou Tyre, etc. are also under construction in earnest. Some supporting raw and auxiliary materials enterprises such as Xingda Steel Cord, Fihonor Group, etc. have been completed and gone into operation.

Deng Yali hoped that leading enterprises in the industry should adhere to innovation as the core, focus on enhancing scientific and technological R&D ability, improve middle- and high-end supply capacity, value-creating ability, core technology controlling ability, intelligent manufacturing and green development abilities, and promote the quality of development to a new level, striving for initiative and achieving high-quality development in the future.