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The Economic Operation Data of Tire Industry in Last Year Was Better Than the Expectation
Date:2017/02/24    Author: -    From: China Rubber Journal

“In 2016, the economic operation situation of the Chinese tire industry was stable on the whole and the realization of all economic indicators was better than the expectation, creating a good beginning for the implementation of the ‘13th Five-year’ Plan. However, the general situation was still very serious. 2017 will also be a turbulent adjustment period. Tire enterprises should firmly establish an idea of innovative development, focus on developing quality and benefit, effectively avoid risks and actively adapt to the new normal of the economic development.” Shi Yifeng, the secretary-general of Tire Branch, gave an analysis on the industry situation in the 35th secretary-general conference of China Rubber Industry Association.

Operation Indexes Were Better than the Expectation

In the fourth quarter of last year, the economic operation data of the tire industry continued to turn better on the basis of September. According to the statistics of the Tire Branch on 41 key member enterprises, from January to October 2016, the output of comprehensive outer tires increased by 7.58% on year-on-year basis (similarly hereinafter), in which, the output of radial tires increased by 9.30%; among radial tires, the output of all-steel tires increased by 6.29%, and that of semisteel tires increased by 10.96%. The sales revenue of tires increased by 1.51%, in which, that of radial tires increased by 2.45%. The export delivery quantity of tires increased by 1.79%, in which, that of the exported radial tires increased by 2.52%; and the export delivery value of tires decreased by 6.03%. There were 7 enterprises running under deficit, including 5 domestic enterprises and 2 foreign-owned enterprises. The amount of loss was RMB 560 Million Yuan, accounting for 17.07%.

From January to November 2016, as for 41 key member enterprises, the realized production value of tires at current price decreased by 0.25%, while the realized sales revenue increased by 3.47%, in which, that of radial tires increased by 4.38%. The output of comprehensive outer tires increased by 8.05%, in which, that of radial tires increased by 9.71%, and that of all-steel tires increased by 7.55%; the radial rate was 91.44%, which increased by 1.38%. The realized export delivery value decreased by 4.89%, and the export rate (value) was 31.90%, which decreased by 1.56%; the export delivery quantity of tires increased by 1.93%, in which, the export quantity of radial tires increased by 2.59% and the export rate (quantity) was 42.33% with a decrease of 2.54%. The realized profits and taxes of 38 enterprises increased by 9.24%; the realized profits increased by 14.62%; and the profit rate of the sales revenue was 4.42%, which increased by 0.43%. There were 7 enterprises running under deficit, and the amount of loss was RMB 662 Million Yuan. The manufactured inventory was RMB 14.663 Billion Yuan, which decreased by 10.72%.

After analysis, it is caused by the substantial growth of production and sale of the auto industry closely related to tires since August 2016, driving the tire industry to enter the growing channel. According to the statistics of China Association of Automobile Manufacturers, from January to November, the production and sale of the Chinese auto reached 25.027 million and 24.948 million, which respectively increased by 14.26% and 14.11%. Thereinto, the production and sale of passenger cars were 21.7433 million and 21.6781 million, which respectively increased by 15.56% and 15.57%; and those of commercial cars were 3.2836 million and 3.2699 million, which respectively increased by 6.31% and 5.30%. 

Besides, the price of such raw materials as NR, SR, rubber chemicals, carbon black and steel cord all rose at different levels last year, with the addition of the increasing labor cost and environmental protection cost, so the price of tires also accessed to the ascending channel. Since November 2016, tire enterprises have successively given notice to rise price, and the enthusiasm for rising price has been lasting to January 2017 with a range of 2% ~ 8%. According to the current trend, such enthusiasm for rising price will go on.

However, Shi Yifeng also emphasized that based on the above data, though the output growing trend in the tire industry is almost consistent with that of the auto industry, and the indicators of both output and delivery quantity turn better, the sales revenue and export delivery value which really reflect the economic benefit of enterprises are unsatisfactory. Therefore, it can’t consider that the industrial operation has turned better from now on.

Continuously Severe Challenges in the Future

“Though the economic operation data of the tire industry in last year was better than the expectation, the potential challenges are still severe and tire enterprises must pay close attention.” Shi Yifeng said.

The biggest challenge that the tire industry is facing is the American “antidumping and countervailing” policy against the Chinese truck and passenger car tires. After the implementation of the American “antidumping and countervailing” policy against the exported Chinese passenger car and light truck tires in 2015, America also carried out the “antidumping and countervailing” investigation against the exported Chinese truck and passenger car tires in 2016. In October 2016, the consolidated effective tax rate in the final amended preliminary antidumping and countervailing determination by the US Department of Commerce was 47.01% ~ 50.17%. On January 24, the United States International Trade Commission (ITC) will hold a hearing; on February 8, ITC will release a work report; on February 22, ITC members will vote; and on March 6, ITC will release the final result.

America is the largest export market of the Chinese truck and passenger car tires. Because such tires are closely related to the economic development and the market prosperity situation, which can’t be transferred to other markets as saloon car tires, that is to say, if the American export market is hindered, even EU, Southeast Asian or other markets can’t compare with the capacity of the American market. Therefore, if America finally judges to implement “antidumping and countervailing” policy against Chinese truck and passenger car tires, the export of the Chinese saloon car tires, truck tires, passenger car tires and off-the-road tires to America will all be hindered, which will surely bring enormous influence on the export and production capacity release of the Chinese tires in the future.

According to the customs statistics, last year, the quantity of Chinese tires exported to America decreased substantially. From January to October 2016, China exported 195,000 tons of motor car tires to America with an export amount of USD 477 Million, which respectively decreased by 27% and 36.6%; 439,000 tons of truck and passenger car tires were exported with an export amount of USD 949 Million, which respectively decreased by 11.3% and 23.7%.

In addition, in the first half of last year, India and Brazil respectively carried out antidumping investigation against the Chinese truck and passenger car tires and industrial tires. In the future, the trade friction situation is not optimistic for the export of Chinese tires.

Besides the giant challenges from trade frictions, in Shi Yifeng’s opinion, the following problems are also in the face of the tire industry: Firstly, the product structure adjustment process is slow, the economic operation quality and efficiency are not high, and the credit risk on the financing side is tighter; secondly; some local authorities lay unbalanced supervisions over enterprises and the market, leading to lack of a fair competitive environment among enterprises. The product price of some enterprises is ridiculously low, the after-sales “three guarantees” service is unsatisfactory, and the market competition is more and more cruel; thirdly, most domestic enterprises are poor in technical innovation ability, brand construction awareness and channel construction. These problems such as product homogeneity, enterprise homoplasy, low brand effect and lack of originality in service exist generally; fourthly, the external dependence is very high and export mainly relies on low end and low price, just falling into the trap of foreign trade protectionism sanctions; fifthly, the industrial economy downtown showing an L shape may be normal. However, some enterprises are short of full preparation for the difficulties brought about by aftermarket and lack calm and in-depth analysis on this round of recovery with blind optimism and even intend to make a new round of expansion, which will surely lead to new excess production capacity and intensify the production and operation risks; sixthly, the requirements on environmental protection and safe production are more and more strict, bringing about higher demands for the production equipment, raw materials, process selection, resource and energy utilization, end treatment recovery of pollution wastes of tire enterprises. Besides, the Environmental Protection Law will be performed next year, which will surely further increase the manufacturing cost of tires. Environmental protection and safety will inevitably decide the existence and disappearing of the enterprises.

Promote the Supply-side Reform to Adapt to the New Normal

As introduced by Shi Yifeng, though there are many difficulties in the tire industry, there are also some highlights.

Firstly, promote the development of green tires. On June 15, 2016, CRIA released the Tire Grading Standard, Management Rules for Tire Labeling and CRIA tire labeling styles and formally implemented voluntary posting of tire labels on September 15. Up to the end of last year, CRIA had signed the tire label usage agreement with 9 enterprises and issued “Chinese Tire Label” to these enterprises. Besides, the second “Green Tire Safety Week” was successfully held to propagandize knowledge about green tires to customers, advocate safe use of tires and accelerate healthy development of green tires in China from the perspective of terminal consumption to promote the auto products with energy conservation, emission reduction and tires with proprietary brands to medium and high end.

Secondly, grasp the opportunity of Made in China 2025 and improve the intelligent manufacturing level. At present, some tire enterprises have taken the first step in “intelligent manufacturing” and established demonstration projects or intelligent factories. Following the production and operation of Qingdao Sentury Intelligent Factory, many tire enterprises established intelligent factories in 2016, such as the intelligent high-end passenger car tire Huayang base project built by Triangle Group, the all-steel tire and semi-steel tire all-process industry 4.0 intelligent factory of Doublestar Group, which innovates the development mode, rearranges the process, and changes to provide more services from “selling products”; and the all-field intelligent, all-process automatic and all-dimensional green tire manufacturing plant in Wanli Tire Hefei Plant, which reduces the production time of a single whole tire process from 48h to 30h and realizes the per-capita production value of RMB 3.3258 Million Yuan/year, 3 times of the traditional mode with greatly improved product quality homogeneity so that it can save water by 400,000 tons and save electricity by 26 million KWH per year.

Thirdly, grasp the opportunity of “The Belt and Road” and go out to expand new development space. In the face of the shortage of NR raw materials at home and trade frictions against Chinese tires abroad, in recent years, tire enterprises have been out for development to effectively solve the domestic overcapacity and avoid the foreign “anti-dumping and countervailing” policy. By the end of last year, 12 enterprises had established tire plants, rubber parks and rubber processing plants abroad.

Fourthly, stick to innovative development. Some key backbone enterprises take scientific research as the basis, market as the orientation, product quality and brand construction as the focus and combine production, study, research and utilization together to effectively promote the enterprise to become stronger and baggier. For example, the first professional tire testing ground——Central Asia Tire Testing Ground of Linglong Group was formally operated on October 18, 2016, fulfilling the dream of several generations of rubber people, which will surely provide strong support for Chinese tires to innovate the research and development and step into the matching market.

Fifthly, strengthen the operation of assets. In 2016, Shandong Linglong Tire Co., Ltd., Triangle Tire Co., Ltd. and Jiangsu General Science Technology Co., Ltd. were listed on Shanghai Stock Exchange. The raised funds were all invested in the high-end product projects in the industry, indicating more tire enterprises hope to become bigger and stronger through the capital platform.

Sixthly, implement announcement management for accessing to the tire industry. On April 13, 2016, the Ministry of Industry and Information Technology released the first batch of 23 enterprises meeting the Tire Industry Access Conditions. There are 27 tire enterprises applying for access in the second batch. The Ministry of Industry and Information Technology Raw Materials Industry Department organized experts to carry out the on-the-spot inspection of 11 enterprises thereinto in December 2016, and will release the second batch of enterprises this year. The implementation of the access conditions will make for eliminating the backward production capacity, regulating the tire market and leading the scientific development of the industry.

In Shi Yifeng’s opinion, there are many uncertain factors in the global economic development in 2017, which will bring chain reactions to the tire market. 

Though the tire market still has rigid demand, the American “antidumping and countervailing” policy against the Chinese semi-steel tires and the off-the-road tires has caused a strong influence. In particular, the “antidumping and countervailing” policy against the off-the-road tires has lasted for 9 years, and the annual review lasting for many years has caused great loss to relevant enterprise. Besides, the “antidumping and countervailing” policy against the all-steel tires will have a concentrated reflection in this year, so the export profit of tire enterprises may be lower and lower. In addition, the economic growth of the domestic market slows down and the growing potential is restricted. In a word, enterprises must make necessary psychological preparations and take countermeasures.

Shi Yifeng said that 2017 would be an important year in the implementation of the “13th Five-year” Plan as well as a boosting year to promote the supply-side structure reform. Therefore, tire enterprises should firmly keep the general keynote of seeking improvement in stability, pursue growth with quality and benefit and effectively avoid risks.