·The tire industry will open the structure adjustment

In 2013, China won the No. 1 position in global auto production and sales without any suspense, which has been the world's number one for five consecutive years. Along with the rapid development of the automotive industry, the tire industry closely related to it has also made great progress in recent years. However, with the increasing bottleneck of automobile production capacity, the tire industry is also facing a huge adjustment.

Overcapacity needs transformation

After joining the WTO, China's tire industry entered the stage of market competition, and entered the golden period of industry growth. According to statistics from the National Bureau of Statistics, tire production increased from 190 million in 2003 to 890 million in 2012, and in 2006. Replacing the United States, becoming the world's largest tire producer.

In 2003-2012, China's automobile compound growth rate was as high as 18% (composite car compound growth rate of 22.5%, commercial vehicles 12.5%). Passenger demand and commercial demand two-wheel drive caused the Chinese tire market to be in short supply for a long time before 2010. Chen Weifang, secretary-general of the Rubber Machinery Professional Committee of China Chemical Equipment Association, believes that the main driving force of this round of growth cycle is the rapid growth of China's automobile consumption and the transfer of global tire production capacity to China.

At the same time, the price advantage of China's manufacturing has promoted a sharp rise in tire exports. Customs statistics show that the export volume has increased from 160 million in 2003 to 410 million in 2012, and global tire production capacity has gradually shifted to China. In 2013, China's tire production accounted for 38% of the world.

The rapid growth of China's demand in 2003-2012 also promoted the expansion of tire investment and production capacity. The compound annual growth rate of production capacity in the decade was as high as 20.5%, which was higher than 18.5% of the demand growth rate. The recent investment growth rate has slowed down relatively, but the planned capacity for new construction or production in 2014 is 180 million, which is expected to increase by 12% compared with 2013.

For the long-term rapid growth of production capacity, Chen Weifang believes that this has led to more serious structural problems. On the one hand, the product structure is excessive, and the newly added capacity is mainly concentrated on the low-end all-steel radial tire with low technical threshold. In addition, the geographical structure is excessive, the main production capacity is concentrated in Shandong Province, and the homogenization competition is fierce. Only one county is concentrated, and 25% of the production capacity in China is concentrated.

Industrial concentration turning point

As the most important component of emerging markets in China, the tire industry has achieved a compound annual growth rate of 18.8% over the past decade, but at the same time it has accumulated disadvantages such as reduced concentration, overcapacity and serious homogenization.

Such a set of industry figures exposes the above issues. In 2008-2012, China's tire industry concentration level (CRS10) fell from 36.26% to 28.7%, far lower than the global level of 64.3% in the same period of 2012; in 2012 China's average all-steel project started at 70%, semi-steel project operating rate 85%, the operating rate is seriously divided, the high-end joint venture factory operating rate is above 100%, and the low-end factory starts even less than 50%; the production capacity is concentrated in the low-end brand, the top ten tire brands recognized by consumers in 2012 only There are 2 Chinese brands shortlisted.

The rapid expansion of production capacity for four years from 2008 has led to a decline in operating rates and performance differentiation since 2012. Industry leaders with branding and channel advantages benefit from high operating rates and low raw material costs, while neglecting brand quality. The low-end producers who are blindly expanding are on the verge of meager profit or even loss due to sales bottlenecks.

The 2012 round of the acquisition of Shenyang Peace tires opened the industry reshuffle. In 2013, there was another merger and acquisition of Jinyu Industrial Co., Ltd., which acquired the purchase of Xinjiang Kunlun Tire and Sailun. It is precisely because of the above mergers and acquisitions, etc. According to the forecast of CITIC Securities Research, the CRS10 of China's tire industry will rebound to 30.64% in 2013, up 2.9% year-on-year, welcoming the inflection point of concentration.

Huang Lili, a researcher at CITIC Securities Research Department, pointed out that because the tire industry has the characteristics of both consumer goods and cyclical products, brand effect and channel advantage play a key role in market share in overcapacity, and raw material cost is the dominant factor determining product gross profit. The pattern of overall overcapacity and low raw material prices will not change in the next 1-2 years.

Benefiting from this, the leading advantages of the industry with brand, channel and technology advantages will be further strengthened, and the performance differentiation will be further intensified. Huang Lili said, “The prelude to the merger and reorganization of China's tire industry has just started, and the concentration in the future may gradually increase.”

The stronger the stronger is the trend

As a complex and safe consumer product, consumers cannot visually identify product performance. Quality reputation and brand value are one of the most important factors affecting consumers' purchasing decisions.

Chen Weifang told reporters that international and domestic leading tire companies have long-established and reputable brand assets. Products with strong brand influence ensure the psychological safety margin of consumers, and purchase behavior is greatly influenced by the brand. Being able to enjoy the brand premium is the way for companies to settle down.

In addition, the tire industry is a technology-intensive industry. Technology upgrades often change the industrial structure and bring strategic growth opportunities to enterprises. The technical barriers in the high-end products field guarantee the company's gross profit margin.

Huang Lili, who has long studied the domestic tire industry, believes that China's leading tire companies have gradually shifted from traditional low-cost export business to domestic sales.

For example, Chaoyang Tire, Jinyu Tire, and Linglong Tire have already begun to cooperate with domestic light trucks such as Changhe and Jianghuai, and gradually occupy the replacement tire market, and have been recognized by consumers in second and third tier cities. In the future, with the gradual improvement of the brand value and technical strength of domestic leading enterprises, there will be a very broad space for domestic market growth.

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