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Sales Revenue Decrease With Inventory Increase In Tire Industry

Research Report on China Tire Industry, 2013-2017
Since China tire industry entered "Mild Increase" era in 2012, tire production and sales in the first half of this year were both encouraging and worrying.
Good economic return was the biggest bright spot of tire industry in the first half of this year. Rubber price was decreased by about 25% in the first half of this year compared to the corresponding period of last year. Furthermore, the import duty of natural rubber decreased by 800 CNY/ton over 2012; tire price decreased by about 10%. Therefore, economic returns of tire enterprises increased. However, Chinese tire enterprises have poor ability to bargain, tire price continues to fall, sales revenue significantly decreases, and the growth of profits and taxes obviously declined compared with that in previous years. Research Report on China Tire Industry, 2013-2017
Export Volume Increased While Price Decreased -Research Report on China Tire Industry, 2013-2017
Tire export volume remains increasing with the growth rate at 4.7%. Radial tire increased by 7.8% over the same period of 2012. However, the export delivery value decreased by about 2% over the same period of 2012, which is not prevalent in recent years. Industry insiders pointed out that the volume and delivery value of export could not keep in step with each other as China tire export price significantly decreased. It was estimated that the price was decreased by about 10%. China tire industry should pay more attention to this situation and take measures against anti-dumping risk from abroad. Foreign-funded enterprises are intensifying the efforts on Chinese tire market exploitation when Chinese tire enterprises strive to increase exports.

High-level Inventory -Research Report on China Tire Industry, 2013-2017

Tire inventory increasing has two reasons. One is that demand of downstream market is insufficient. The other is that current rubber price is relatively low and some tire enterprises adopt the strategies to increase output and inventory, which is especially obvious in domestically funded enterprises. The total inventory of the industry takes up 18.6% of the total sales revenue, and there are five enterprises whose inventory takes up more than 50% of the sales revenue. Therefore, the business risk is high and tire sales in the second half of 2013 will be under high pressure. In terms of product category, OTR tires, especially giant OTR tires, are in high level stock. The sales situation of OTR tires is not promising.
In addition, based on the statistical data, tire investment in the first half of this year substantially increased. According to initial estimation, the annual production capacity of all-steel truck tires will achieve more than 20 million units, and semi-steel radial tires of passenger vehicles will achieve 100 million units. This wave of tire investment is featured with large scale, quick investment decision-making, more new factories, geographic concentration, shorter project cycle, mainly investing for middle and high grade tires, quick funds available, etc.

Research Report on China Tire Industry, 2013-2017