Worthy of caution: 80% of the Chinese tire market is foreign investment
The early part of the year saw a surge in raw material prices for the rubber industry, triggering renewed volatility in the market. This year, the Chinese tire industry is experiencing fierce competition and rapid growth. In 2007, driven by the booming automotive sector, domestic tire sales reached 330 million units, marking an 18% year-on-year increase and placing China at the top of the global tire market. Experts predict that in 2008, car sales in China will surpass 10 million units, with tire demand growing by over 25%.
Multinational tire giants are expanding their presence in China aggressively. Companies like Michelin, Bridgestone, Hankook, Kumho, and Jiatong have set ambitious targets, aiming to capture more than 20% of the Chinese market. This means that these foreign brands intend to collectively control over 80% of the market share, intensifying competition in the retail sector.
In 2008, the tire retail market became even more competitive. Hankook Tire’s China head of strategic planning, Jin Hengtai, announced the company's entry into the economy car segment. Meanwhile, Jean Dominique Senard, CFO of Michelin, stated that the company would focus on this segment as well. Michelin also plans to double the production capacity of its Shanghai and Shenyang plants. Goodyear, another major player, announced its involvement in the Passat B6 project.
Industry insiders believe that manufacturers are now competing fiercely for network expansion without cost. The tire retail market accounts for two-thirds of total tire sales, making network coverage a critical factor in market success. With international tire companies entering the Chinese market, establishing a strong distribution network has become essential for survival.
Goodyear revamped its sales strategy, service model, and after-sales support to create a national standard authorized auto service network in China. Within six months, it opened 300 retail franchise stores, averaging nearly two new stores per day. Michelin has invested over $400 million in China, operating factories in Shenyang and Shanghai, and adding more than 100 dealers annually. Bridgestone, the world’s largest tire company to build a factory in China, invested 5 billion yuan in a Huizhou plant, causing significant industry reactions.
Hankook sees China as its most important market, having established factories in Jiaxing and Jiangsu. In 2007, it produced 100 million tires domestically, signaling a new development phase. Despite holding the highest market share in passenger car tires, Hankook aims to expand further by introducing a local service approach and targeting 300 franchise stores within five years.
Multinational tire companies are gradually moving from high-end to low-end markets, squeezing out local players. An expert from the China Construction Machinery Network noted that the foreign giants' production capacity releases could significantly impact the domestic market. Additionally, these companies continue to launch "green" tires, enhancing their competitiveness in an environmentally conscious market.
Despite the challenges, Chinese tire companies are actively seeking breakthroughs. While domestic brands like Wanli, Triangle, Linglong, Luck, BCT, and Haida only account for 25% of the market, they are working to improve technology and strengthen their positions. However, rising raw material costs, RMB appreciation, and tighter monetary policies pose significant threats. If not addressed, these factors could lead to serious losses for the domestic industry.
Nevertheless, there is hope. Some local companies are shifting focus back to the domestic market. South China Tire Corp, for example, is increasing its efforts in China and reorienting its strategy. Industry analysts suggest that as more domestic leaders shift their attention to the local market, competition in the high-end segment will intensify.
Experts believe that the blind preference for foreign brands among Chinese consumers is a major obstacle for domestic companies. Yan Hongzhen argues that the quality gap between locally produced tires and top global brands is minimal. Changing consumer perceptions requires consistent high-quality products, market testing, and building a strong reputation to gain consumer support for the national industry.
Wenzhou Selection Technology Co., Ltd. , https://www.zj-packaging.com