Tire industry upgrade! Giant company plans to invest 1.2 billion to expand production capacity(December 20, 2024)
Recently, there have been reports that Michelin seems to have plans to expand its production capacity in South Carolina, USA.
Michelin 1.16 billion to expand its US factory
On December 10, 2024, a planning meeting minutes in Lexington, South Carolina showed that local authorities were ready to negotiate with Michelin about its local factory expansion plan.
In some of the latest local documents, it can be seen that Michelin is studying investment in capacity expansion in North America, with an investment amount of approximately US$159 million (RMB 1.16 billion).
According to the City Council, the negotiations between local authorities and Michelin will involve a "cost agreement." This negotiation usually includes "tax incentives for business investment." According to the data, Michelin's factory in Lexington, South Carolina, involves the production of passenger car, light truck and bulldozer tires, with a nameplate capacity of 288,200 tons per year. The increase in capital of US factories has been rare in the past two years. In fact, in the past two years, we have heard more about cautious investment and even factory closures regarding US production capacity.
Suspend investment, stop production and close factories
In the third quarter of 2024, Nexans, which had planned to invest in factories in the United States, said it was reconsidering the plan.
In the fourth quarter of 2024, Sumitomo Rubber announced an important decision after releasing its third-quarter report-because its US factory has been losing money for many consecutive years, it decided to close the factory and prepare to transfer the production capacity of its US factory to its Thai factory. It said in a statement-even if the double anti-dumping tariffs and shipping prices are added, the operating costs of the Thai factory are still lower than those of the US factory.
The suspension of plans and the suspension of production and closure of factories are inseparable from one factor-cost considerations! What is the most expensive operating cost of US factories? It is labor costs. In fact, not only Sumitomo Rubber, but almost all tire companies with factories in the United States have mentioned the rising labor costs since 2022. Even this cost expenditure was specifically mentioned as an impact on its corporate profits. This is why the hot domestic investment in the United States has cooled down since 2023, and more tire companies have begun to seek the possibility of building factories around the United States to supply the US market (Michelin invested 140 million Canadian dollars to expand its Bridgewater plant in Canada in 2023). Sumitomo Rubber, which has just announced the closure of its US factory, actually has such plans. However, there are also great risks in building factories around the United States. One of the risks is the anti-dumping and countervailing duty rate!
North American factory construction is shrouded in clouds
After the results of the US election came out, Trump, who is about to take over as US president, said on social media that he plans to impose tariffs of up to 25% on all imports from Mexico and Canada after taking office. Therefore, even if the tire factory is moved to other North American countries, it does not seem to effectively solve the problem of high costs.
Another point worth noting is that Trump does not exclude tire companies from other countries from expanding production capacity in the United States. Michelin's expansion plan has attracted widespread attention in the industry. If this investment is implemented, as a leading tire company, whether it is possible to bring about a new round of US capacity investment, we will continue to follow up on relevant news.
