Chinese Tires: SEA Layout & Challenges

When BYD electric trucks carrying Sailun tires drove into the Chonburi Industrial Park in Thailand, the Southeast Asian layout of Chinese tire companies had quietly completed a strategic encirclement. Since Sailun Group took the lead in entering Vietnam in 2012, this twelve-year industrial migration has written a new chapter in Southeast Asia.

Thailand, Vietnam and Cambodia have gathered more than 30 Chinese tire companies, building a complete industrial chain from natural rubber planting to high-end tire manufacturing. However, the recent anti-dumping investigation launched by the US Department of Commerce on Vietnamese tires, like a sword of Damocles hanging over their heads, forced Chinese companies to re-examine the underlying logic of their global layout.

Thailand: from cost depression to innovation highland

In the Eastern Economic Corridor of Thailand, the industrial layout of Chinese companies has broken through the simple logic of capacity transfer. The battery production base built by New Wanda Electronics with an investment of US$1.48 billion has formed a technical resonance with the Sailun Tire Smart Factory, building a three-dimensional industrial chain to support new energy vehicles, making Thailand the most important overseas base for tire companies to export to Europe and the United States.

What is more noteworthy is that the localized innovation capabilities of companies such as Linglong Tire show that Chinese tire companies are simultaneously exporting technological innovation capabilities. Senqilin, Linglong, Zhongce, Huayi, Prinx Chengshan, General Shares, Senqilin, 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.

In addition, tire giants such as Michelin, Bridgestone, and Yokohama have all settled in Thailand. The competition in Thailand's production capacity market is still fierce, which is still severe for tire companies. At present, the domestic news in Thailand is still relatively tense, which has an adverse impact on stabilizing local order.

Vietnam: The dilemma and breakthrough of the pioneers

As the "first stop" for Chinese tires to go out, Vietnam is undergoing a transformation from a "bridgehead" to an "eye of the storm". The all-steel radial tire production line in the Hanoi Industrial Zone runs day and night, supporting an important share of tire imports in the US market. However, the US Department of Commerce recently accused Vietnam of a tire subsidy rate of up to 23.6%.

This country, which will export $2.2 billion to the United States in 2023, once again verified the cyclical law of "double-reverse" sanctions. It is worth noting that the Vietnamese Ministry of Industry and Trade recently approved Sailun Group to add 500,000 engineering tire production capacity. Behind this counter-trend expansion is a strategic layout for a diversified market. Sailun Group, Guizhou Tire, Jinyu, Haohua and other companies have invested in Vietnam. Vietnam has a relatively developed economic foundation and is a socialist country. In recent years, many tire companies have chosen to build factories in Vietnam.

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 started construction of the PCR project with an investment of US$312 million (RMB 2.2 billion) in Xining Province, Vietnam. With the entry of more and more Chinese tire companies, Vietnam's current production capacity has exceeded 10 million, and it is very likely to surpass Thailand's important position in Southeast Asian tire exports.

Cambodia: Ecological response of latecomers

In Cambodia, the "agglomeration effect" of Chinese tire companies is rewriting the classic paradigm of industrial transfer. Top Tire's 200,000 high-performance solid tire project has not yet started, and six supporting companies such as Qingdao Doublestar and Wanli Tire have gathered around it, forming a complete ecosystem from carbon black production to tire testing.

The relocation of this industrial cluster has increased the scale of Cambodia's tire industry by 15 times in three years, and the export volume has also grown rapidly. The more far-reaching impact is that according to the Cambodia Rubber Development Association, the technology output of Chinese companies has increased the utilization rate of local natural rubber and created the symbiotic value of the industrial chain. Sailun, General Shares, Doublestar, Wanli, Fumas and other companies are involved.

Although Cambodia is not prominent in Southeast Asia and its economic conditions are relatively backward, it has great potential. Its government is also very friendly to China and is an important partner of China's "Belt and Road" initiative. Cooperation in transportation projects such as railways and canals indicates that the construction of Chinese tire factories in Cambodia has broad prospects. More importantly, compared with the tire production capacity of Thailand, which has attracted much attention, and Vietnam, which has suffered US tariff sanctions, Cambodia is still a paradise.

Undercurrent: Concerns about global layout

The ghost of anti-dumping and anti-subsidy sanctions reappears When the Indonesian Ministry of Industry publicly stated that it would "strictly review investment in the tire industry", the contradictory mentality of Southeast Asian countries was clearly revealed.

According to data from the Vietnam Rubber Association, Chinese companies have controlled 70% of the country's tire production capacity. This near-monopoly industrial structure is repeating the historical script of Chinese tires encountering "double anti-dumping" from Europe and the United States in 2014. More importantly, 17% of the products involved in the US investigation of Vietnamese tires were re-exported by Chinese factories, exposing the systemic risks of the "origin bleaching" strategy.

Surachai, secretary-general of the Thai Tire Association, pointed out: "The current trade friction is essentially a dispute over industrial control, and simple regional migration is difficult to solve the structural dilemma."

Supply chain vulnerability exposed

Behind the seemingly prosperous production capacity figures, there are worrying supply chain risks. In the Thai tire industry cluster, 85% of molds and some auxiliary additives still rely on imports from China.

This "extracorporeal circulation" model makes the operation of overseas factories still rely on the domestic industrial chain. During the 2023 shipping crisis, the raw material inventory of Vietnamese tire companies fell below the safety line twice, exposing the "fatal weakness" of the modern industrial system.

When tire companies began to build factories and expand to more distant regions, their global layout has shifted from a single cost orientation to a complex risk hedging system.

Invisible barriers of technical standards

The EU's upcoming tire labeling regulation 3.0 will increase the wet braking performance standard by 15%, which will create new technical pressure on Southeast Asian production bases. Test data from relevant departments show that the product qualification rate of local Chinese-funded factories is not higher than that of domestic factories. This technological gap is particularly evident in the field of new energy tires.

The test report of German Rhine TÜV shows that the rolling resistance coefficient of electric vehicle tires produced in Southeast Asia is higher than that of mature products on the market. The market environment is not optimistic and there are many difficulties, but challenges often contain opportunities.

For future planning, especially on the road to building factories overseas (such as Southeast Asia and South America), the Chinese tire industry needs to grasp the trend more accurately and adjust its strategy in the second half of the next year and in 2026 to cope with the two extremes of "expansion frenzy" and "market indifference" in the industry.

1. Deepen the localization strategy

Establishing production bases in Southeast Asia and South America is not just a simple transfer of production capacity, but also a deep localization. For example, in Southeast Asia, companies can make full use of the abundant local natural rubber resources to reduce the cost of raw materials; at the same time, by hiring local employees and cultivating technical teams, they can integrate into the local social culture and enhance brand influence.

In addition, customized product design and service solutions for consumption habits, policies and regulations in different markets can effectively enhance market competitiveness.

2. Optimize global layout

Under the wave of globalization, a single market is difficult to support the long-term development of enterprises. To this end, Chinese tire companies need to further improve their global network and build a multi-point production and sales system.

On the one hand, they can quickly enter emerging markets through mergers and acquisitions or joint ventures; on the other hand, they can strengthen cooperation with internationally renowned car companies to win more supporting orders. For example, a leading company set up a research and development center in Brazil and reached a strategic cooperation agreement with local automakers to jointly develop high-performance tires adapted to tropical climate conditions.

This move not only improved product quality, but also laid a solid foundation for opening up the Latin American market. In short, in the current complex and changing market environment, if China's tire industry wants to achieve high-quality development, it must adhere to the three principles of innovation-driven, quality first, and win-win cooperation, dare to face challenges, be good at seizing opportunities, and strive to create a world-class brand with international competitiveness!