Chinese tire makers advance overseas investment plans

Chinese tire manufacturers are targeting a new phase of overseas expansions in response to the continuing imposition of import tariffs on products from China as well as uncertainty over domestic growth prospects.

The country’s largest tire maker Zhongce Rubber Group Co. Ltd (ZC Rubber), for one, envisages establishing production in North America and then in Europe under its 10-year growth strategy.

During an 11-12 July client & media event at the Nurburgring race track in Germany, ZC Rubber marketing director of international business Richard Li said the goal is to deliver “continuous growth”, particularly overseas.

The focus, he stated, will be on increasing sales volumes and sales of higher-value tires, supported by expansion of ZC Rubber’s current production set-up – nine plants in China and one in Thailand – with ‘local production for local markets’ as a guiding principle.

Key to ZC Rubber’s ambitions, noted Li, will be funds from an IPO, which China’s largest tire producer aims to complete by the end of this year – following hoped-for clearance by the country’s financial-markets regulator.

Due to the IPO, ZC Rubber can only provide estimated 2022 revenues, which Li put at ‘around $4.2 billion’.

International business, he said, is “growing quickly,” particularly in the US and Europe: expanding overall by about 15% in 2022 to represent more than 40% of total sales at ZC Rubber – towards a target of 60% overseas sales and 40% in China.

At $1,782 million, international business accounted for 39.4% of ZC Rubber’s total sales in 2021, up from a prior-year $1,782 million or a 37.6% share. Group estimates indicate overseas sales on track to exceed 44% of total revenues in 2022.

Li’s presentation also included figures showing that international unit-sales of truck & bus radials  (TBRs) had increased by 13.4% between 2020 and 2022 to 21.15 million tires, while passenger car tire (PCR) sales grew by 21.8% to 59.3 million units.

For his part, ZC Rubber deputy general manager of international business Leo Liao said “we will be a global tire manufacturer, not only a Chinese manufacturer.”

“We already have a factory in Thailand [and are] this moment considering a North American factory and the next step will be to consider an EU factory,” continued Liao, who has specific responsibility for developing the market in Europe.

The order-of-priority, he later explained, reflects the more pressing need to address US import tariffs on Chinese-made tires, particularly PCRs – whereas output from the Thai plant is not subject to EU tariffs, which only apply to TBRs.   

Towards a target of achieving sales of 10 million PCR and 1.2 million TBR tires over the coming five years, Liao said the way forward is “local sales teams to ensure more efficient communications and local engineering teams to develop more suitable products.”

ZC Rubber, he continued, aims to enhance its local logistics capabilities to ensure faster supply, and leverage its “OE business to energise the aftermarket.”

Leading the way

Meanwhile, Chinese tire makers Qingdao Sentury Tire Co. and Shandong Linglong Tyre Co. Ltd are already  progressing projects to establish tire production facilities in Western markets.

In a 5 June stock exchange filing, Sentury issued details of its Ä280-million project in Morocco. The plant will have capacity to produce 6 million car and light truck tires per year, with output in the first year reaching 3.6 million units. Construction work on the project is set to begin in July and take 18 months to complete.

Sentury is also progressing a planned Ä500-million greenfield tire production project in Galicia, northwest Spain.

The first phase, expected to be completed in 24 months, will have a production capacity of 6 million units. By 2025, production is slated to reach 12 million units.

Under its “833Plus” strategy, Sentury aims to build eight ‘intelligent tire manufacturing bases’ worldwide over a decade: three plants in China, two in Thailand, one each in Europe, Africa, and North America.

Sentury currently operates a 15 million units/year plant in Jimo, Qingdao, Shandong and a site in Rayong, Thailand, with a capacity of 5 million units/year.

Leading the overseas charge, though, Linglong Tire late last year announced the start-up of commercial production of all-steel TBRs at its new plant in Zrenjanin, Serbia.

Phase I of the project includes manufacturing capacity for 1.2 million units of TBRs, with PCR capacity set to reach 6 million units by the end of 2023.

As originally announced, the Ä863-million plant in northern Serbia will eventually have annual capacity to produce 12 million PCRs, 1.6 million TBRs, as well as 20,000 off-road tires.

The Serbian plant is part of Linglong’s ‘7+5’ business strategy which will see the company operate seven tire plants in China and five globally by 2030.

Asia focus

Asia, however, remains the focus for the bulk of Chinese tire makers’ plans for investment outside of their domestic market.

General Science, for one, has unveiled plans for a Ä200 milliongreenfield tire plant in Baotou, Inner Mongolia. The facility will have annual capacity to produce 1.2 million TBRs.

The unit is also designed to manufacture 100,000 units of off-road tires, said the company in a 5 May announcement to the Shanghai Stock Exchange.

To be built within 20 months, the “intelligent tire” factory is part of General Science’s “5X strategic plan”, which aims to expand the group’s reach overseas.

In April, General Science officially inaugurated a plant in Cambodia’s Sihanouk province. The unit is designed to produce 5 million PCRs and 900,000 all-steel TBRs a year, mainly for export to the US, Europe and Brazil.

Meanwhile, Wanli Tire is investigating the feasibility of establishing a tire plant in Cambodia, taking advantage of inward investment incentives there. A delegation led by Wanli chairman Wang Song met with officials from Cambodia’s investment board 30 May to discuss the project, as part of Wanli’s overseas strategy.

Sailun Group is already operating a Ä300-million tire production plant in Svay Rieng, Cambodia. Started up in November 2021, the facility has nominal capacity to produce 9 million PCRs a year.

Greenfield project

And in February, Qingdao Double Star Co. Ltd (Doublestar) unveiled plans to build a greenfield tire plant in Cambodia, in partnership with local company Ube Development Co. Ltd.

In a stock exchange filing 20 Feb, Doublestar said it aimed to invest Ä200 million in the new facility with capacity to produce 8.5 million high-performance radial tires per year.

The new facility is intended to support Doublestar’s ‘localisation’ strategy and aims to “actively respond” to international trade barriers in view of high tariffs on Chinese products.

Another major Chinese player Prinx Chengshan is looking to extend its reach overseas, having recently expanded its tire manufacturing plants in Chonburi, Thailand and Shandong, China.

With the phase II project on-line, the Thai site can produce 8 million semi-steel PCR tires and 2 million all-steel TBR tires. Target market regions include North America as well as Europe, where the Chinese tire maker opened a major warehouse facility last July.

In addition to the extra Thai capacity, Prinx also completed an expansion project at its production facility in Rongcheng City, Shandong last year.

At full capacity, the Shandong factory can now produce 7.4 million TBR tires and 11.2 million PCR tires per year.

Overall, Prinx increased production capacity by 26% year-on-year across all tire products, with PCR tires seeing a 33% rise and TBR tires up 15%. In total, the group now has capacity to produce 19.2 million PCRs and 9.4 million TBRs across its two manufacturing bases.

On the other hand, Prinx recently suspended a project to build a second domestic tire production factory – in Anhui, Hefei – due to the economic slowdown in China and globally.

The decision, said Prinx, was based on “the forecast and analysis of the domestic and international economic situation and the company’s capacity utilisation rate.”

The group, therefore, decided “to suspend the implementation of the project of the tire production base in Anhui,” it said in an annual results statement issued 31 March.

In its first phase, the project was to have produced 800,000 sets of all-steel TBRs and 5 million PCRs.