Car Makers' Tire Cooperation Advantages

In the rapidly developing automotive industry, tires, as a core automotive component, have a direct impact on vehicle safety, comfort, economy, and adaptability through their performance and quality. Automakers' demand for tires is characterized by a diverse range of specifications and scenarios. This trend reflects the continuous expansion of the automotive product market segment and the evolving diversification of consumer demands.

The reality is that a single automaker cannot produce all tire categories, making collaboration with multiple tire companies an inevitable choice for the automotive industry. This collaborative model not only effectively mitigates supply chain risks but also reduces procurement costs through competitive mechanisms, injecting strong momentum into the sustainable development of automakers.

1. Characteristics and Causes of Automakers' Demand for Tires with Multiple Specifications and Scenarios

The characteristics of automakers' demand for tires suggest a profound market logic behind this trend. With the increasing segmentation of consumer demand, automobiles are evolving from traditional means of transportation to personalized products tailored to meet diverse lifestyles and usage scenarios.

Family car users place extremely high demands on driving quietness during their daily commutes. Quiet tires, with their unique tread pattern design and rubber formula, effectively reduce noise during driving, creating a comfortable ride for passengers, making them the preferred choice for family car tires. Off-road vehicles, often navigating muddy and rugged unpaved roads, require tires with strong grip, impact resistance, and wear resistance.

Their deep tread pattern and high-strength tire carcass structure ensure vehicle maneuverability and safety in complex road conditions. New energy vehicles, relying on battery power, have stringent requirements for range. Low rolling resistance tires, by optimizing their tread structure and reducing energy loss during rolling, can significantly improve the range of new energy vehicles, aligning with their technical characteristics and market demand.

Furthermore, the diverse tire specifications across different vehicle types, such as sedans, SUVs, and MPVs, and in different sizes (e.g., 15-inch, 18-inch, and 22-inch), further complicate automotive companies' tire needs. A single tire size or type is no longer sufficient to meet diverse production needs.

2. Practical Obstacles for a Single Automaker to Cover All Tire Categories

However, attempting to cover all tire categories with a single automaker would face numerous insurmountable obstacles. First, the high barrier to entry for technological research and development. Different tire types have vastly different R&D objectives.

Quiet tires require a focus on noise control technology, while off-road tires must overcome the challenges of high-strength materials and complex carcass structures. Low rolling resistance tires must strike a balance between reducing rolling resistance and ensuring wear resistance. The development of each tire type requires long-term technical accumulation, a dedicated R&D team, and significant capital investment.

It is difficult for a single automaker to simultaneously master the core R&D technologies for multiple tires. Forcing R&D into all product categories would easily lead to resource fragmentation, making it difficult for R&D results to achieve market-leading performance.

Second, the high cost of production line construction. Different tire sizes and types require specialized production equipment and production lines. For example, the production equipment for large off-road tires is completely different from that for small quiet tires, and specialized technicians are required to commission and maintain the production lines.

Building multiple production lines for different types of tires not only requires significant upfront investment but also significantly increases ongoing operating and maintenance costs. This undoubtedly increases the financial burden on automakers, impacting their investment in core businesses like vehicle R&D and production.

Furthermore, there are challenges with production efficiency and cost control. Full-line production means automakers need to simultaneously manage the production of multiple tire types. However, the production processes and cycles of different tires vary, making production line scheduling more difficult and making it difficult to coordinate production, thus reducing overall production efficiency.

Furthermore, since the production volume of each tire may not reach the level of large-scale production, economies of scale cannot be achieved. Unit production costs will be significantly higher than those of specialized tire manufacturers, ultimately leading to a lack of price competitiveness for tire products in the market.

3. The core advantages of automakers collaborating with multiple tire companies: risk diversification and cost reduction

Against this backdrop, collaboration between automakers and multiple tire companies has become the best path to overcome these challenges and achieve a win-win situation. Its advantages primarily lie in diversifying supply chain risks and reducing procurement costs.

(I) Diversifying Supply Chain Risk: Ensuring Continuity in Vehicle Production

From the perspective of diversifying supply chain risk, in a globalized production system, supply chains face numerous uncertainties, such as natural disasters, geopolitical conflicts, raw material price fluctuations, and supplier production accidents.

These factors can all lead to supply disruptions from a single supplier. If an automaker relies on a single tire supplier and that supplier encounters these issues and is unable to deliver on time, production could be halted. This would not only result in significant economic losses but also potentially damage the company's market reputation and customer trust.

Establishing partnerships with multiple tire companies and forming a diversified supply chain effectively mitigates this risk. If a single supplier experiences a supply disruption, automakers can quickly switch to other suppliers to ensure a stable supply of tires and maintain the continuity of vehicle production.

For example, during the COVID-19 pandemic, tire companies in some regions suspended production due to epidemic prevention and control measures. Automakers that partnered with multiple tire companies were able to minimize the impact of the suspension by leveraging resources from suppliers in other regions.

Automakers that relied on a single supplier, however, faced the dilemma of a production halt. Furthermore, the competition and checks and balances among multiple suppliers can also encourage suppliers to prioritize product quality and supply stability, further mitigating supply chain risks.

(II) Reducing Procurement Costs: Leveraging Competition to Achieve Cost Optimization

From the perspective of reducing procurement costs, the competitive mechanism among multiple tire companies can offer significant cost advantages to automakers. During the collaborative process, automakers, as buyers, have greater choice and bargaining power.

To secure orders, different tire companies will compete on product price, quality, and after-sales service. Automakers can leverage this competitive dynamic to compare quotations and product advantages from different suppliers and select the most cost-effective partnership, effectively reducing procurement costs.

At the same time, as the scale of collaboration expands, automakers can negotiate more favorable procurement prices and payment terms with suppliers. For example, when an automaker places a large purchase order with a tire company, the supplier is often willing to offer a discount to secure stable orders and sales.

Furthermore, the presence of multiple suppliers can encourage them to continuously optimize their production processes, improve efficiency, and reduce their own costs, ultimately enabling them to offer lower-priced products to automakers.

In the long run, this competitive mechanism will not only help automakers reduce their current procurement costs but also drive cost optimization and technological advancement across the tire industry, generating sustained cost benefits for automakers.