Car sales drive the development of tire companies can focus on domestic

After experiencing 8% slow growth in 2008, the sales growth of light vehicles in China exceeded 55% in 2009 to 13.79 million vehicles. Many executives in the automotive industry expect that in the next five years, China’s auto sales will maintain growth of around 20%.

The excellent development of China's auto industry will also lay the foundation for the future development of the automotive tire market. The source told this reporter: “The growth of China’s auto and construction machinery industry has indeed led to the growth of the tire industry, which has had a positive impact on the tire industry.”

Overall, the "unforbidden special case" had a negative impact on the overall sales and profits of the Chinese tire industry in 2009, which was less than the positive impact of the rapid growth of China's auto industry and construction machinery industries.

In 2009, China’s automobile production was 13.79 million, which surpassed the United States to leap to the top in the world. The unprecedented prosperity has caused the domestic tire industry to “blowout.” Last year, China's tire production reached 655 million, an increase of 18% year-on-year. Experts predict that due to a series of domestic automobile industry development policies, the average annual growth rate of China's tire industry in the next five years could reach more than 10%.

Due to the increasing popularity of domestic automobiles, China's tire sales are growing at a faster rate than the world average. The president of Sumitomo Rubber, Japan’s second-largest tire manufacturer, expects China’s tire sales to maintain growth at a rate of 10% this year, while the global average increase is only 3%. Industry insiders expect that the scale of the market for passenger car tires in 2015 is expected to reach 129 million.

In addition, the average replacement cycle of automobile tires has also decreased from the past 5 years to 2.5 years in 2008 as the frequency of use of automobiles and the increase in mileage have increased. In mature areas of the automotive market such as Europe and North America, the tire replacement cycle is only 2 years. This shortening of the replacement cycle will undoubtedly lead to an increase in the consumption of replacement tires.

In addition to the explosive growth of the automotive industry to the tire industry, the construction machinery industry will also drive the growth of the tire industry for some time in the future. BOC International gave engineering machinery industry companies an advantage over general trends.

Natural rubber is the main raw material for tire manufacture, 70% is dependent on imports, and the import tariff is as high as 20%. Recently, prices of natural rubber have increased by nearly 20% compared with the same period of last year due to droughts in Southwest China and Southeast Asia. This has brought tremendous cost pressure to companies.

The rise in the price of natural rubber has aggravated the industry’s concerns about the negative impact of the “special protection case”. In addition to the substantial increase in production and sales volume of downstream vehicles, another important reason that led to the significant increase in the tire industry's 2009 performance was the sharp drop in raw material prices. However, since May 2009, natural rubber prices have begun to rise sharply due to strong demand. In the past three months, prices have accelerated.

Industry experts believe that the ability of Chinese auto parts companies to pass on costs is strong, but the rise in raw materials will still put pressure on companies. Many tire companies said: "This pressure has already begun."

In this case, industry insiders suggest that tire companies can focus on the domestic market in addition to raising their prices. According to industry insiders: “The implementation of the automobile to the countryside and the trade-in policy will greatly increase the car ownership rate in the secondary and tertiary markets, and at the same time allow the tire companies to see the potential for growth in the secondary and tertiary markets. Tire companies continue to rely on the old road of export. The days of 2010 will not be as good as before, opening up new rural markets, or will help the tire industry to reduce the worry of overcapacity."

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