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New Challenges to Chinese Tire Industry in 2010

shcri.com-In 2010, prominent problems in Chinese tire industry are the substantial growth of cost and the decline of profit growth rate. Firstly, the prices of raw materials see considerable growth. In April 2010, the price of natural rubber reached about 25,900 CNY/ton, rising by over 100% YOY. Secondly, the expenses on water, electricity and gas rise continuously. Thirdly, the labor cost is increased significantly. According to the investigation of China Research and Intelligence, transnational enterprises adjusted their tire prices successively since 2009Q4 and the average price growth rate is over 10%. In May 2010, another group of transnational enterprises declared to raise the tire prices by 5%~8%. Chinese tire enterprises also increased the domestic sales price and export price of tires at the end of 2009 and the beginning of 2010, but the growth rate is only 3%~5%. On the whole, tire price increase of domestic enterprises is in slow progress. For more information please refer to “Research Report on Chinese Tire Industry, 2010-2011” (www.shcri.com/reportdetail.asp?id=437)    

Presently, Chinese tire industry is confronted with prominent product structural inconsistency, severe homogeneity, inadequate production capacity for new products (e.g. environmentally-friendly & safety tires) and blind expansion of low-end products. Therefore, production capacity expansion and low-level redundant construction have to be prevented. Furthermore, the international trade conflict will be more frequent in 2010, so Chinese tire export situation is still gloomy. The high special safeguard tariff of 35% by USA will affect China’s tire export to USA severely. For more information please refer to “Research Report on Chinese Tire Industry, 2010-2011” (www.shcri.com/reportdetail.asp?id=437)     

China has promised to reduce the carbon dioxide emission per unit GDP by 40%-45% in 2020 compared with that in 2005. It is predicted that many expenses will be increased. There will be a huge cost for carbon emission reduction in China. Besides, the pressure for CNY appreciation is growing. Since 2005, CNY has appreciated by near 20%. According to investigation, when CNY appreciates by 1%, the export profit rate of tire will drop by 1%. The average profit rate of tire export is only 3%-5%. Moreover, China will keep the macroeconomic policy continuous and stable in 2010. The government will continue to implement the proactive fiscal policy and moderately easy monetary policy. The national urbanization development will continue to promote the development of highway, automobile and real estate industries. The auto production is expected to reach 15.50 million in 2010 with the growth rate of 15% YOY. The auto reserving volume will exceed 80 million. Thus, the tire demand in Chinese market will be further enlarged. All these will support the development of the tire industry.

Chinese tire industry should speed up the product structure adjustment and develop products with high technology content and high added value for the global market. The focus should be environmentally-friendly and energy-saving products with high efficiency, intelligent products applying the modern electronic information technology and products with high safety performance. Green tire can reduce the rolling resistance by 20%~30% compared with ordinary radial tire. Moreover, the petrol consumption can be cut down by 2%-4% or even higher, the travel distance can be improved by 35% and the carbon dioxide emission can be reduced by about 400 g per 100 km. If all domestic cars are equipped with green tire, the annual petrol saving amount can reach over 410,000 tons at least and the carbon dioxide emission can be reduced by over 3 million tons.

Source: Research Report on Chinese Tire Industry, 2010-2011 (www.shcri.com/reportdetail.asp?id=437)

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