Tire production capacity, accelerator and brake are stepped on together
From 2023 to 2024, Chinese tires took advantage of the global high demand to expand their production capacity crazily. In two years, more than 30 tire companies built 35 factories around the world, adding 337 million tire production capacity.
01 337 million, tire production capacity explosion
According to incomplete statistics, from 2023 to 2024, Chinese tire companies in domestic and overseas bases, as well as foreign-funded tire companies in China, have increased their investment in 310 million semi-steel tires and 23.35 million full-steel tires.
However, in the capacity investment in these two years, Shandong is still the region with the largest increase in global capacity.
Taking the capacity investment in 2024 as an example, the four tire companies in Shandong only increased the capacity of 51.88 million semi-steel tires and 12.3 million full-steel tires; accounting for 24% and 69% of the total investment respectively.
In Jiangsu, only one tire company invested 33.5 million tire production capacity in 2024. This tire company is the first 10 billion tire investment project in 2024 and the largest single project in the overall investment amount in 2024. In addition, Bridgestone also invested US$26 million (RMB 190 million) in Wuxi, Jiangsu at the beginning of 2024 to expand the Wuxi factory to 2 million high-end passenger car tire production capacity. Kumho Tire also invested RMB 206 million at the beginning of the year to add 1.78 million new energy high-performance tires to the Nanjing factory.
In addition, Hunan also welcomed 9.8 billion yuan in tire investment in September 2024, and the local production capacity plan increased by 21.75 million. In Anhui, where car companies gather, the investment in tire production capacity increased by 30.05 million in 2024. This is the fourth consecutive year that Anhui has been regarded as a key layout base by tire companies.
Jiangsu, Anhui and Hunan accounted for 16%, 14% and 10% of the overall passenger car tire production capacity investment in 2024, respectively. In addition, investment in tire capacity in the past two years has also shown a trend of overseas and domestic development going hand in hand.
02 Overseas investment expands by 170 million tires a year
In 2024, at least 11 Chinese tire companies will have new factories, expanded production, or even put into production, with a total production capacity of more than 169 million tires.
Although Thailand has been subject to anti-dumping and countervailing duties by the United States in the past five years, the local natural rubber raw material supply advantage still makes it very attractive for investment. However, it can be seen that since the United States began to impose anti-dumping and countervailing duties on Thai all-steel tires, the investment in all-steel tire capacity here has been extinguished.
On June 15, 2024, Universal Shares changed Thailand's "annual production of 500,000 all-steel radial tires and 600 late semi-steel radial tires project" to "annual production of 10 million semi-steel radial tires project", involving an investment of 1.976 billion yuan.
In addition, the series of anti-dumping and countervailing measures launched by the United States against Thai tires since 2021 have also caused some tire companies to begin to shift their overseas investment targets to other regions. "Cambodia fever" has emerged in Southeast Asia.
In 2024, Chinese tire companies added 47 million passenger car tire production capacity in Cambodia, accounting for 21% of total capacity investment and 27% of overseas investment.
Indonesia and Mexico became the emerging capacity investment bases in 2024, and Zhongce Rubber and Sailun Tire both set up in these two regions. The two emerging investment targets added more than 7.2 million semi-steel tires and full-steel tires, as well as 3.7 tons of off-road tire capacity.
In Indonesia, Zhongce Rubber's overseas tire factory took only 233 days to complete the construction from the start of construction to the first full-steel radial tire off the line, setting a new record for overseas factory construction in the tire industry. In fact, as China's factory construction speed continues to accelerate, the investment cycle of tire projects has been shortened in recent years. This also means that generally "profitable" tire factories can be put into production within a year at most.
03 Growth rate of overseas factory production
In addition to the Zhongce Indonesian factory, which entered the production stage in just over 200 days, the second phase of the Cambodian tire project, which was launched by General Shares in January 2024 with an investment of 1.495 billion yuan, was also put into production in August of the same year.
Doublestar Tire's Cambodian production capacity was also put into production in September. The factory is a joint venture between Doublestar Group and Zhongqi Group in the Special Economic Zone of Kratie Province, Cambodia, which started construction in May 2023. The total investment is as high as 200 million US dollars, and it can achieve an annual production of 8.5 million high-performance radial tires, including 7 million semi-steel radial tires and 1.5 million full-steel radial tires.
Senqilin Morocco Factory has also been officially put into production on September 30, 2024. The factory took only 11 months from the official start of construction on October 21, 2023 to the official production and operation on September 30, 2024.
In October, the full-steel and semi-steel tires of Haohua Tire's Vietnam factory were officially put into production, and it only took 11 months from the start of construction to the start of production. After full production, the project can reach 12 million sets of semi-steel radial tires and 2.4 million sets of full-steel radial tires.
It can be seen that in the construction of overseas factories, Chinese tire companies have shown amazing speed and efficiency. However, this also reflects to a certain extent the urgency of Chinese tire companies to sell overseas factories.
The overseas factories of Chinese tire companies are generally aimed at the local market of the construction site and the European and American markets, with the advantages of low cost and high selling price. According to the financial reports of listed companies, the net profit margin of Chinese tire companies' overseas factories is around 20% (compared with the profit margin of domestic factories of less than 9%), so Chinese tire companies are very keen to invest and expand overseas production capacity.
Although there is no cost advantage, because they can export to the European and American markets more smoothly, tire companies are also willing to spend more money to try to build factories in North America, Europe and Africa.
Linglong Tire announced in August 2024 that it would invest 6.4 billion yuan to expand Serbia; Sailun Tire and Zhongce Rubber have also successively set up bases in Mexico, North America; the Senqilin Morocco factory mentioned above, which has been put into production, is also built to seize more European tire market matching and replacement opportunities.
Because of this, the construction of overseas bases of Chinese tire companies often achieves product rollout within a year and a half of official announcement - faster is required to seize more opportunities. In contrast, domestic investment, some tire factories are already "pending".
04 Chinese tire projects with longer construction cycles
Sanli Tire announced its "6 million sets of high-performance semi-steel radial tire project" bidding documents in May 2024. Subsequently, Sanli Tire also filed a capacity upgrade project of "annual production of 3.38 million semi-steel radial tires". However, it should be noted that according to the original plan, the project was to start construction in November 2023 and be completed in November 2025. This also means that it is expected to take longer for the project to be implemented.
Kubisson, which shocked the industry for a whole year, completed the capping of the workshop at the end of 2024 with a production capacity of 33.5 million tires (30 million semi-steel radial tires and 3.5 million full-steel radial tires) in Huai'an, Jiangsu, and plans to officially put the 15 million semi-steel tire production capacity of the first phase project into operation in January 2025.
Yishimai New Materials, which also built a factory in Jiangsu, entered construction in July after the official announcement in May.
Jianda Tianxia, which had previously "cast a net" widely across the country, has now put its "15 million new energy vehicle tire production capacity project" into production in Jilin. Overall, only about 20% of China's tire companies' domestic production capacity investment can actually be offline in a short period of time.
05 2024 Full-steel tire capacity investment slams on the brakes
In addition to the slow-moving investment, there are also many production capacities that have been stopped and closed. Especially for full-steel tire capacity, only some companies are still insisting on advancing. The two listed companies have stopped the previously planned full-steel tire capacity investment in 2023.
The optimization of foreign-funded full-steel tire capacity will continue in 2024. In 2024, Michelin plans to dismantle some truck and bus tire vulcanization lines in the Shenyang plant, and add passenger car tire vulcanization lines and tire storage areas; Bridgestone closed the Shenyang plant. Not only full-steel tires, but also the semi-steel tire capacity investment of foreign-funded tire companies is gradually being reduced-Sumitomo Rubber reduced the capacity of 12.6 million lines of its Hunan plant in 2024.
In fact, the slow progress of investment is often affected by market sentiment. In the past two years, Chinese tire products have been "rampant" overseas, so tire companies are more willing to spend more energy on overseas capacity to accelerate the completion and commissioning of projects. China's passenger car tire sales have risen, and tire companies are more willing to work hard on passenger car tire supply-from 2023 to 2024, China's semi-steel tire investment has increased by 12 times.
