Building factories overseas, the iron rule of Thailand, Cambodia and Vietnam
With the saturation of the Chinese tire market, the domestic market alone can no longer meet the needs of tire companies for development. In order to avoid internal friction, tire companies must expand overseas markets. Export business has been blocked by various anti-dumping and anti-subsidy measures. The only way is to find a new way to build factories overseas and find a paradise that is more conducive to building factories and sales.
A tire factory with a production capacity of tens of millions of tons has landed in Cambodia
On January 12, 2024, the groundbreaking ceremony of the Wanli Tire Cambodia Production Base under Guangzhou Industrial Control Group was held in the New Bavet Special Zone in Svay Rieng Province, Cambodia. After the completion of the entire base, it will be able to produce 10 million semi-steel radial tires and 1.2 million full-steel radial tires annually. It is not only the first overseas project of Wanli Tire, but also a key step for Guangzhou Industrial Control Group to accelerate the globalization strategy and actively participate in the high-quality construction of the "Belt and Road".
Tire companies in Thailand, Cambodia and Vietnam are clustered
Tire companies build factories overseas, and the first place to bear the brunt is Southeast Asia. As the main rubber producing area, Southeast Industry has unique advantages, and the labor cost in Southeast Asia is relatively low. In order to avoid the risk of double anti-dumping, the first batch of tire companies that went overseas to build factories collectively chose Southeast Asia, which is close and has relatively low raw material and labor costs.
Since 2012, when Chinese tire companies established their first Southeast Asian production capacity in Vietnam, in the past 10 years, almost every year one or two tire companies have chosen Southeast Asia as tire factories or expanded their original production capacity. After 2019, the "double anti-dumping high tax rate" in the European and American tire markets has gradually made many Chinese tire factories lose their price advantage. As a result, for dealers in Europe and the United States, it is more affordable to turn to import tires from Southeast Asia. Therefore, in the past few years, tires produced in Southeast Asia have increased in the US market.
To this day, Southeast Asian countries are still the first choice for Chinese tire companies to go overseas, and Thailand, Cambodia and Vietnam have become the regions where tire companies gather.
01 Thailand:
Senqilin, Linglong, Zhongce, Huayi, Prinx Chengshan, General Shares, Senqilin and Linglong, etc. At present, Thailand has become the region with the most mature conditions for Chinese tire companies to build factories overseas, but maturity means few opportunities. Moreover, tire giants such as Michelin, Bridgestone, and Yokohama have already settled in Thailand. The competition in the capacity market in Thailand is still stressful for tire companies. And there is still a lot of news in Thailand at present, which has an adverse impact on stabilizing the local order.
02 Vietnam:
Sailun Group, Guizhou Tire, Jinyu, Haohua, etc. Vietnam has a relatively developed economic foundation and is a socialist country. In recent years, many tire companies have chosen Vietnam to build factories. For example: On September 11, 2023, Shandong Haohua Tire invested US$500 million (RMB 3.6 billion) to build a factory in the SIKICO Industrial Zone in Vietnam. On December 12, 2023, Jinyu Tire's US$312 million (RMB 2.2 billion) PCR project in Xining Province, Vietnam, started construction. With the entry of more and more Chinese tire companies, Vietnam currently has a production capacity of more than 10 million, and it is very likely to catch up with Thailand's important position in the export of tires in the southeast industry.
03 Cambodia:
Sailun, General Shares, Doublestar, Wanli, Fumax, etc. Although Cambodia is inconspicuous in Southeast Asia and its economic conditions are relatively backward, it has great potential. Its own government is also very friendly to China and is an important partner of China's Belt and Road Initiative. The cooperation in transportation projects such as railways and canals indicates that the construction of Chinese tire factories in Cambodia will have a promising future.
And more importantly, compared with the high-profile tire production capacity in Thailand and Vietnam, which has been sanctioned by US tariffs, Cambodia is still a paradise.
Thailand represents the present, Cambodia represents the future
After 2012, Chinese tire companies began to frantically deploy overseas production capacity. Thailand has become the most important overseas production capacity base for Chinese tire companies with its advantages such as the origin of natural rubber raw materials and business environment.
According to incomplete statistics, in the past ten years, a total of 6 factories belonging to Chinese tire companies have been established here, and the production capacity of Chinese tire brands has jumped from 0 to more than 64 million. Thanks to the export channel of the Thai production capacity base, the export sales and profits of Chinese tire companies have been newly guaranteed, and Thailand has also become the largest import source of the US tire market for many years as China's tire production capacity increases.
Especially since 2020, the global economic recovery speed is unstable, overseas inflation rates have continued to rise, and other factors have affected the "deflation" of car owners' wallets. More rational tire consumption has accelerated the expansion of the market share of cost-effective tires in Thailand and other Southeast Asian regions.
With the anti-dumping and countervailing duty investigation on truck tires launched at the end of 2023, the Thai factories of Chinese tire companies are likely to be doomed. Therefore, many tire companies have begun to choose to build factories in Cambodia. In January 2024, Sailun added investment in the Cambodian project to expand its semi-steel tire production capacity to 12 million. Combined with its current full-steel tire production capacity, it is expected that Sailun's annual tire supply capacity in Cambodia will exceed 13 million after 2025.
The first phase of GM's Cambodian factory has a capacity of 5.9 million tires (5 million semi-steel radial tires and 900,000 full-steel radial tires), and the second phase of 4.25 million new production capacity (3.5 million semi-steel tires and 750,000 full-steel tires) has also started construction at the beginning of the year; Doublestar has designed a capacity of 8.5 million in Cambodia (7 million semi-steel radial tires and 1.5 million full-steel radial tires), and its first phase is expected to be put into production this year; Fumax plans to build a capacity of 9.2 million tires in Cambodia (8 million passenger car tires and 1.2 million commercial vehicle tires); Youdao plans to produce 7.2 million sets of tires in Cambodia (6 million sets of semi-steel tires and 1.2 million sets of full-steel tires).
Mexico is becoming the Southeast Asia of the Americas
01 Zhongce Rubber invests in Mexico
Recently, Zhongce Rubber officially launched its new tire project in Mexico. The project is located in the Alianza Industrial Park in Saltillo, Mexico, with an investment of US$500 million, which will bring 1,500 jobs to Coahuila State. It is reported that in April 2023, Manolo Jiménez Salinas, governor of Coahuila, Mexico, had reached an investment agreement with Zhongce Rubber during his business visit to Asia.
Zhongce Rubber's Mexican project is located in the industrial park of Saltillo, Coahuila, adjacent to the factories of well-known car companies such as Mercedes-Benz, Stellantis, Ford, and Tesla.
02 Sailun Group invests in Mexico
On May 15, local time in Mexico, the groundbreaking ceremony of the annual production of 6 million semi-steel radial tires jointly invested by Sailun Group and Mexico Tire Direct (hereinafter referred to as "TD Company") was held in Irapuato, Guanajuato, Mexico.
The Mexican tire project is an important step for Sailun Group to "go global". Following the construction of factories in Southeast Asia, the joint investment of Sailun Group and TD Company in the construction of a tire production base in Mexico is of great significance. It will further improve the global strategic layout of Sailun Group, better meet the product needs of global users, especially the North American market, and enhance the competitiveness and market share of Sailun Group in the global market.
Zhongce Rubber and Sailun Group both chose to build factories in Mexico at almost the same time. It seems that Mexico will also be a paradise for Chinese tire companies in the future.
Tire export is a process, and the result is Europe and the United States
At least for now, Mexico in North America, Serbia and Spain in Europe, and Morocco in Africa have all made attempts at production capacity by leading tire companies. If we trace the development history of the top five tire companies, we can see that if we want to eventually become one of the world's largest tire suppliers, we will eventually have to establish production capacity bases in the United States, Europe and other places. Only in this way can we completely avoid the sanctions of both sides.
Trade protection cannot stop Chinese tires
The rounds of bullying against Chinese tires and Chinese overseas tire factories in multiple overseas markets are actually due to the fear of the growth of Chinese tire brands and product market share. Chinese tires with high cost performance are extremely popular in overseas markets. At the same time, with the continuous improvement of the gold content of domestic tires, domestic brands have begun to emerge in the overseas high-end market.
From products to brands to services, every step is closely catching up with tire giants. Although it is empty talk to say that there is no gap with international big brands, more and more consumers recognize and are willing to support Chinese tires, which is the best proof that Chinese tires have gotten rid of scattered, chaotic and poor. As the elimination of obsolete production capacity gradually draws to an end, a "V-shaped cluster" of China's tire industry has been formed.
Leading companies have more energy to compete with overseas tire companies in the high-end market. Even if the road ahead is not smooth, we believe that as long as we focus on quality and technology, the future of China's tires will still be infinitely exciting!
