Since the fourth quarter of last year, China's tire industry operating environment and operating conditions of rapid decline. According to the China Rubber Industry Association Tire Branch 46 member units of statistics, in October 2014 tire production fell by as much as 17 percent, the first decline in production year on year is the year, and a huge decline. Tire industry this year has been to maintain a high inventory in October 2014 after entering some companies choose to close or shut down some production lines, which is caused by a substantial decline in production reasons. Tire Branch statistics show that in November 2014, member companies tire inventory amount 19.7 billion yuan, an increase of 18.32%.

 

High inventory, lower product prices, operating rates remain low, money is tight, most tire companies feel very sad day. Combined with the current tire industry and external environment, this situation is expected to continue for a long time. What causes this condition, the tire industry will make a plan to do? I had to understand and analyze the current situation, industry experts have also raised insights.

 

Depressed market decline in capacity utilization

 

I visited some of the tire companies, almost every one of the open space are filled tires. Under normal circumstances, the tire business inventories for production in about a month, but this year most of the tire business inventories maintained until more than two months. Choose high inventory is started from the beginning of the tire business management strategy that in the second half after the season tire sales will pick up transportation will digest some of the stock. But the second half of the year, not only did not flourish tire sales, but more depression. Faced with rows of inventory of tires, a tire company CEOs Guangrao shook his head and said, 'I did not expect the second half of this year, anti-bad bad tire sales, companies can significantly reduce production. 'Guangrao many tire companies shut down production lines, Shandong Yongsheng Rubber Group Co., Ltd. production fell by more than 1/3; Shandong Huasheng Rubber Co. shut down a plant, more than 200 people attrition; Fang Xing Rubber Co. three Engineering projects are all steel tire stopped. This phenomenon is diffused in the country, some large enterprises operating rate is also lower. Now, a good tire companies operating rate of 80%, the majority of enterprises operating rate at around 60%.

 

Tire companies, especially Shandong tire companies see the situation on the subsequent general to suspend the project investment. Especially after October 2014, some tire companies by 'see' to 'not optimistic' conversion, some tire plant will 'project pause' to 'project was canceled' conversion. Tire Co. in Shandong Haoyu project facilities will be located in Yinan, Shandong sold Okay Long Rubber Technology Co., Ltd. is located in Dawang Rubber Co., Ltd. Shandong Heng Ding Town guangrao canceled projects. CSI, double the money and so are adjusting investment strategy, said it would re-planning of future tire layout. By early 2014 halted investment affect tire, Shandong Province, there were more than 10 projects to a halt. Recent projects have loose regulation, there are several companies tire project won the approval of the investment department of Shandong Province. Tire equipment tender very little, mainly earth loop Development Co., Ltd. Ningxia, Jilin lucky Tire Co., Ltd. Hebei Yi Feng tires and other items.

 

Three mountains of oppression tire market

 

The main cause of tire industry status quo is serious excess tire industry structure. Deng Yali China Rubber Industry Association that China tire structural surplus is positive, particularly low-end tires excess homogeneity serious, but upscale and green tire there is a large space for development.

 

According to the China Rubber Industry Association data, in 2013 the cumulative production of steel tire 107 million, 369 million semi-steel tire. However, according to the Professional Committee of rubber machinery equipment ordered from the case estimates, to the end of 2014 of steel tire production capacity will reach more than 165 million, semi-steel tire production capacity will reach more than 600 million. While the actual capacity and demand a larger gap, but overall excess tire doubt. Overcapacity leads to fierce competition and disorderly, tire companies would rather let the price not to market, resulting in sharply lower tire prices. 2014 China's tire price 'stumble endlessly', semi-steel tire price index fell from 86.05 in January to 74.5 in December, a decrease of 13.42%; steel tire price index fell from the beginning of December of 67.98 to 77.74, down 12.56% margin. Tire corporate profit margins have fallen sharply. In October statistics branch profits 44 tire companies, loss-making enterprises 7, the amount of 419.9 million yuan loss, the loss amounted to 15.91%.

 

The second reason is the export trade friction intensified, hinder China's tire exports. Our dependence on foreign large tires, tire exports accounted for about 40 percent of China's tire production. Once the export is bad, China's tire industry, the days will be sad. The second half of 2014 the United States on China's passenger and light truck tires 'dual' investigation, has announced the 'subsidy' tax, corporate tax rate of 12.03 percent in general, coupled with the upcoming January 21 announcement of 'dumping' tax rates, China's tire business unbearable so high 'dual' tax, passenger and light truck tire exports to the US market is basically blocked. September 2014, the Eurasian Economic Commission filing on passenger tire anti-dumping investigation of the card. Tire exports tires will make the market more serious structural surplus, competition between tire companies, is not conducive to the healthy and stable development of the tire industry.

 

The third major reason is the standard composite rubber and natural rubber tire production and the impact of tariff adjustments to improve the business of manufacturing costs. December 31, 2014, "composite rubber General technical specifications" national standards officially released, adjust adhesive gel containing 88% or less; January 1 this year, a natural rubber from the pits will further increase the tariff from the amount of tax. Hangzhou Zhongce chairman Chen Jinrong believe natural rubber adhesive standards and raise tariffs on Chinese tire industry is a huge blow, deadly. Faced with such a highly competitive global tire market, China's tire industry on the one hand to face the endless stream of overseas trade barriers, on the other hand have to face the high cost of domestic and imported natural rubber pressure off sharply, which will further push up the cost of tire manufacture, making China's tire drop in global competitiveness. After the composite rubber standard adjustment will require China's tire businesses looking for new rubber compound for new or substitute its own use.

 

Tire branch chairman Chu Zheng-yu said, these three factors like pressure in the tire industry, the head of the three big mountains, tire market was filled with anxiety, not only in business inventories increased, and dealer inventories are also expanding, the whole industry chain is very capital intense price war is heating degree, operational risks in further increase.

 

Innovation is the way the transition

 

Chu Zheng-yu recommend innovative thinking China's tire industry, promote industry restructuring and upgrading. First, the emphasis on brand building, improve product reputation rather than lower prices. Tire companies should pay attention to changes in consumer behavior, change a single markdowns way to enhance the product's reputation through brand building and quality service. The second is to regulate the market order, to achieve an orderly competition. Tire industry have a sense of control tire production capacity, so that supply and demand remain relatively stable, help dealers to accelerate shipments, stable market sentiment, boost market confidence, promote standardized operation of the entire market. Third, strengthen research and development, market guidance rather than product-oriented. Domestic tire companies to understand the situation, increase R & D efforts, market-oriented, and gradually accumulate, generate and enhance the core technology, the early realization of the 'green' production and transformation. The fourth is to strengthen the marketing model innovation, adapt to the trend rather than resist the trend. Qualified enterprises in the industry should explore the establishment of an appropriate e-commerce model.