“This year is the first year that America implements the “anti-dumping and anti-subsidy” against Chinese all-steel tires. Since American dealers import a lot of inventory, the influence on tire industry isn’t great this year. However, it will be completely reflected next year, and the industry may face a more severe situation.” Xu Wenying, the deputy president and secretary-general of China Rubber Industry Association, said in the National Operation and Export Working Conference of Tire and Relevant Industries held by China Rubber Industry Association Tire Branch on October 20.
Three Existing Problems of the Industry
Xu Wenying introduced the present operation situation of the Chinese tire industry. According to the statistics of CRIA, from January to August, the tire output of major member enterprises increased by 4.01% on year-on-year basis (the same below), in which that of radial tires increased by 5.32%, that of all-steel tires increased by 3.14%, and that of semi-steel tires increased by 6.1%; the export volume of tires decreased by 0.84%, the export amount decreased by 7.99%; the sales income decreased by 3.68%; the profit increased by 32.23%, the profit rate of sales income was 4.73% with an increase of 1.31%; there were 8 unprofitable enterprises with the deficit of RMB 486 Million Yuan; and the manufactured inventory decreased by 16.17%.
After analyzing the causes, she said that it was mainly driven by the increase of real estate and auto industries and the export growth of tire enterprises in the vacuum period before the final arbitration of the American “anti-dumping and anti-subsidy” this year. On the whole, the situation of this year showed the increasing output and decreasing price. The profit increase mainly benefited from the profit increase of top 10 tire enterprises, in particular, the centralized listing of such tire enterprises as Linglong, Triangle and GM. Enterprises with a good development trend will become more booming, while those with a bad development trend will face more challenges.
According to the analysis of Xu Wenying, the tire industry is faced with three problems at present. Firstly, the price of NR is rising. There are two predictions in the just finished NR Conference of Southeast Asia: The price of NR will hit the bottom in 2017 and then rise; or it will rise slowly and turn to minimal inversion in 2010 with a rising trend. Anyway, the cost of NR in next year will exceed that of this year. Secondly, the standard of compounded rubber has been modified, and the state may modify the standard of mixed rubber to limit the proportion of NR below 50%, which will increase the cost of tire enterprises spending on raw materials to a great extent. Thirdly, this is the first year that America implements “anti-dumping and anti-subsidy” against all-steel tires. As American dealers import a large quantity, the inventory of all-steel tires in America is a lot this year, which will surely affect the import demand next year. Furthermore, considering the condition that America implemented “anti-dumping and anti-subsidy” against semi-steel tires in 2014, Chinese tire industry didn’t suffer a great loss in that year. Semi-steel tires exported to America only decreased by 2.5%, however, the export decreased by 42% dramatically in 2015 and then 31.2% in the first half year of 2016. In addition, since semi-steel tires are articles of consumption, even such tires could not be exported to America, they can also aim at other markets such as Europe, which may not lay a great influence on enterprises; however, the market of all-steel tires is related to the economic development. If such tires couldn’t be exported to America, it may not be easy to transfer such tires to other markets, thus bringing a greater influence on Chinese tire enterprises.
Xu Wenying indicated that CRIA would solve the above problems from three aspects. Firstly, make full communications with relevant associations, reach a consensus and apply for reducing the import tariff of NR to the state to promote the common healthy development of both upstream and downstream industries; secondly, organize tire enterprises to make no damage defense in the industry in face of “anti-dumping and anti-subsidy” for a good arbitration result; and thirdly, carry out the tire labeling system vigorously. The Tire Labeling Standard and Administrative Regulations on Tire Labels issued by CRIA were formally implemented on September 15. At present, there have been 20~30 tire enterprises filling an application for tire labeling online.
Comprehensive Company Development under a New Situation
Ge Guorong, the deputy general manager of Zhongce Rubber Group Co., Ltd., shared his consideration of the industrial development.
To start with, the development space of tire enterprises is relative under a new situation, and the realization must be based on their own capability.
Firstly, from the perspective of the production capacity, the American “anti-dumping and anti-subsidy” restricts the export of Chinese tires, but the production capacity of global tires doesn’t reduce actually. For example, the local production capacity of tires in China doesn’t reduce basically but promotes Chinese enterprises to go out. Only the annual production capacity of three Chinese tire enterprises going out from China to Thailand has exceeded 30 million units. Recently, some other enterprises are making preparation for going out. This doesn’t include the opportunities brought to enterprises in foreign countries by the American “anti-dumping and anti-subsidy” against China. Tire enterprises in Indonesia, India, East Europe and even America are all expanding their production capacity. Therefore, on the contrary, this round of anti-dumping promotes the surging increase of the global production capacity.
Secondly, from the perspective of the development opportunity, if the world economy develops well in the wave of globalization, “the earth is flat” without trade barriers or business hostility. Because of the big trade space, as long as the products can be produced, they will be consumed soon. However, in recent years, the manufacturing industry of all the counties is sluggish, which leads to more trade conflicts. Thus, the space for Chinese tires to be exported to the international market is smaller on the contrary. However, if enterprises have the ability to go out, they can make use of local opportunities to solve trade conflicts, which not only provides an opportunity for strong enterprises but also forces domestic enterprises to make a global layout.
Then, the development opportunities are left to thoughtful and strong enterprises. Considering the current development situation, it is not enough for enterprises to only have the strength. As the present market develops rapidly, the demand changes fast. New business modes emerge in endlessly. Enterprises only with strength but no thought can’t survive, either. Taking Zhongce as an example, it was only an enterprise with the sales income exceeding RMB 100 Million Yuan from 1980s to1990s. However, relying on continuous accumulation and development, its sales income has almost reached RMB 20 Billion Yuan at present. Unfortunately, there are few opportunities for small enterprises in the existing market. The gradual accumulation and development mode is not possible for enterprises. Enterprises must be strong at birth. It is really hard for an enterprise whose production capacity doesn’t reach 5 million units of semi-steel tires and 2 million units of all-steel tires to participate in the market competition.
Last but not the least, the difficulties for enterprises to develop under a new situation lie in all rounds. In the past, the development modes of enterprises were no complicated, and they almost competed for products. However, nowadays, when the technical difficulties reach a certain degree, it is more and more difficult to go upwards. For example, it seems little difference between 7 and 6.8 for rolling resistance of tires, but it is really hard to narrow the gap. As we all know, most tires are labeled as B/C, and only a few can reach A. So, technological precedence doesn’t only mean to change the structure design and pattern simply as before, but also has to become competitive on such aspects as materials, equipment, formula, technology, brand, network and service means. In a word, the difficulties for enterprises to develop under a new situation lie in all rounds, and sim- ple buying and selling of tires can’t support enterprises to become bigger and stronger.
Development Strategy Conception of Enterprises in the Future
In Ge Guorong’s opinion, tire enterprises should consider both manufacturing and sales aspects when making a strategy under the new situation.
With regard to tire manufacturing, simple mass manufacturing should be transferred to complex and systematic mass customization to realize the online and offline combination. He said that the present tire 4.0 plant only adopts the 4.0 mode localizing the internal production system. Though there are advanced and automatic logistics as well as same machines, it isn’t really integrated with the market. The real ideal condition should be that the producers know how many tires are distributed in the hands of consumers, how much time is used, how many tires are in the warehouse of retailers, and how many tires are in the warehouse of plants. Only in this way can we know the social need comprehensively. However, the so called make-to-order is based on experience for more than a half, and there is no real consumers’ order. Therefore, the 4.0 system should be effective from raw materials, production and sale of tires, logistics to the information system of the consumer terminal throughout. Only the consumer terminal is smooth completely, the real 4.0 is realized. In a word, new sales modes force the production system, and new manufacturing methods must conform to new sales habits rather than separating sales from production as before.
With regard to sales, new business modes must be people-oriented and reflected on the convenience and shortcut of people. It is systematic and can solve the problem as a package. The former customer-focused mode only realizes one of them but doesn’t make the whole system well operated.
Ge Guorong also introduced the strategic planning of Zhongce Rubber. On the whole, three systems will be built. The first is the tire life cycle system. It is not enough to sell tires out in a new business mode. It needs to make a systematic scheme of the whole tire life cycle from tire manufacturing to installation, use, repair, retreading and carcass recycling to create good value. At present, Zhongce has implemented this system in eight provinces.
The second is the consumer life cycle system. There is a steward around from the consumers purchasing Zhongce Tire to providing solutions for any problem at any time. For example, if a tire of a car has a problem, at the same time that the fault occurs, the mobile phone system will process it automatically and prompt the surrounding service network, rescue price, automatic navigation and the like for the consumer. Such services show the operation mode of 4.0. The point-to-point connection is on the internet.
The third is a new business mode of the ecological cluster development. In the future, the units in the upstream supply chain will be less and less, and more of them will become strategic partners, and the downstream dealers, retailers and mobile service units will be considered as a whole ecological chain. Previously, the producers don’t care about tires any more after they are sold to dealers. Nowadays, information control is implemented for the whole capital flow, inventory, management, information processing, price positioning and other things related to the dealers, including tire direction.
Finally, Ge Guorong summarized that the strategy of tire enterprises will focus on being stronger in the future. Powerful enterprises will make a global layout with China as the core and build the ecological cluster development mode with tires as the core.
It is known by the reporter that Doublestar Group is also actively discussing about the supply-side structural reform and innovating the development concept and mode. Gao Shengri, the deputy general manager of Doublestar Group Co., Ltd., indicated that they had made active exploration and practice in Tire IOT Ecosystem. The strategic concept of Doublestar to build an internet platform enterprise is 1+4+N: open internet + shared network platform (marketing, transaction, logistics, service and evaluation), shared technical platform (research and development, testing and certification), shared manufacturing platform (tires, equipment and robots), shared financial platform (settlement, financing and investment) + independently operated brand company (including socialized tires, rims, batteries...). Therefore, Doublestar and Ping An Bank jointly build the first industry fund in the tire industry and build an open internet platform in the tire industry to serve the transformation and upgrading of the whole industry.
Besides, a “service 4.0 ecosystem” of the automotive aftermarket will be established. The whole system will realize the full process closing from user interaction to user experience, transaction, selection of service mode, actual on-site service and service evaluation. The industry 4.0 ecosystem of Doublestar includes one core, namely mass customization of users; two bases, namely product modularization and lean production; three integrations, namely information and communication technology, digital control technology and intelligent equipment technology; four targets, namely green, high quality, high value-added, and high efficiency; five characteristics, namely enterprise interconnection, organization unitization, process automation, production flexibility and manufacturing intelligence; and six intelligentizations, namely customization, production scheduling, feeding, detection, storage and evaluation intelligentizations.
At present, Doublestar has modified its operation mode from “capacity-focused” to “order-focused”. The rate of defective products is reduced by over 80%, the labor productivity is improved by three times and over 60% of outdated capacity and products are eliminated. Besides, the marketing network is innovated. Doublestar promotes the directly operating 6 cars of resources in domestic market and replaces one household in one place; besides, it also carries out the 1+4 network abroad, namely core partner + great chain + great purchase + great brand + great depot.
