draft Market “back where it started” a year after TBR tariffs

Birmingham, UK - Giti Tire was among the manufacturers to be hit by EU tariffs on truck and bus tires (TBRs) manufactured in China, in May last year.

The European regulators imposed an import tariff of around Ä50 across the board for all tire sizes – 17”, 19” and 22” – manufactured by Giti in China.

“Like other premium manufacturers, we were hit considerably with the tariffs and it was painful,” said Tony McHugh, Giti‘s TBR sales and marketing director UK.

“We have worked through it on the 22.5” sizes, which are now coming from our plant in Indonesia,” the UK company executive added in a 1 May interview at the Commercial Vehicle Show in Birmingham.

About 70% of products, he said, will be supplied from Indonesia by the yearend, with Giti still assessing where to go with the smaller sizes.

The tariff has made the sales of 17.5” tires particularly difficult as “the margin is not there,” noted McHugh, adding that other tire makers have similar problems.

“But the key sizes are now coming through and we are certainly in a better position than at this time last year,” he added. “We will probably be back to where we want to be in the third quarter of this year.”

Full circle

But McHugh is unconvinced by the supposed benefits of tariffs for the European tire market – either in terms of increased sales of safer, higher performance tires or of retreads.

“In my personal opinion, all that has happened is that the market has gone elsewhere,” he said. “More budget tires are now coming in from different places, such as Vietnam, Taiwan, Russia and Turkey.

“Wholesalers, in particular, have found new areas from which to bring the tires in. So even though we have seen a decline in imports from China, the fact is that the tires will come in from elsewhere.”

McHugh also questioned the benefit of sourcing tires from new markets where product quality is less known than in well established plants in China.

And while the need to protect EU retreaders was one of the main arguments for the imposition tariffs, McHugh reported that Giti had “not seen any spike” in sales for its own retread products.

Looking at the post-tariffs situation in the tire market overall, McHugh concluded: “We seem to be back to where we started last May. Prices are near enough where they were, so it has gone a complete full circle.”

Brexit issues

McHugh went on to comment that uncertainty around Brexit has been more of a problem than tariffs for Giti this year.

This March, he said, there was a particular period when dealers and operators were very unsure, with concerns about potential tire-shortages and even port-blockages.

“The uncertainty was very worrying for everyone but then, of course, it didn’t happen. And the UK is going to prolong this (exit from the EU] to later in the year, when it will all kick off again,” McHugh commented.

As a contingency, Giti is carrying a bit more stock but is “not panicking too much” and is more trying to address the uncertainty of the situation.

“We have been carrying slightly higher stocks than we would normally,” said McHugh. “But shipping times from Indonesia are shorter, and we seem to be rolling through that okay.“