July Tire Industry Warms Up

The industry is beginning to warm up: both orders and inventory indicators are rising

In July, the domestic tire industry has ushered in a long-awaited warmth. According to the latest data from the agency, more than 60% of the factories have achieved a slight increase in orders this month, among which the full-steel tire market has performed particularly well - the average inventory turnover days have dropped to 40 days, 5 days shorter than the same period last year, and one week faster than the beginning of the year.

This set of data not only indicates that the problem of large tire inventory backlog that has plagued the industry for a long time has gradually eased, but also reflects the positive signal of demand recovery in the upstream and downstream of the industrial chain. ​

Inventory turnover speed up: the core sign of the recovery of industry prosperity

The improvement of inventory turnover efficiency is the core indicator of the recovery of the tire industry's prosperity. As the core consumables of commercial vehicles such as heavy trucks and trucks, the inventory turnover speed of full-steel tires directly reflects the level of activity in logistics and transportation and the real economy.

In the same period last year, affected by multiple factors, the inventory turnover days of full-steel tires once climbed to more than 45 days, and some companies even had a backlog cycle of more than 50 days, and the pressure on capital occupation increased significantly.

Today, the turnover level of 40 days means that the cycle of a tire from production to storage to terminal sales has been shortened by nearly 12%, the company's capital liquidity has been significantly improved, and the production cycle efficiency has been continuously optimized. ​

Demand-side recovery: Logistics and infrastructure efforts drive terminal demand growth​

The steady recovery of the demand side is the fundamental driving force for the acceleration of inventory turnover. With the full recovery of domestic logistics and transportation and the continued efforts in infrastructure investment, the activity of the freight market has increased significantly.

Data show that the national highway freight volume increased by 5.3% year-on-year in July, and the average daily traffic volume of heavy trucks increased by 4.2% compared with the previous month, which directly led to the growth of demand for full steel tire replacement.

The person in charge of a logistics company said: "The recent freight order volume has increased significantly, the vehicle attendance rate has increased, the tire wear has accelerated, and the replacement cycle has been shortened from the previous 8 months to 6-7 months, and the purchase frequency has naturally increased accordingly." This real recovery of terminal demand has effectively digested the previously accumulated inventory pressure. ​

Supply chain optimization: Digitalization helps accurate docking of production and sales​

The refined adjustment of the supply chain also provides support for inventory optimization. Faced with the dilemma of high inventory in the early stage, tire companies generally adjusted their production strategies and achieved precise matching of production and sales through digital systems.

Many factories introduced intelligent production scheduling systems, dynamically adjusted production plans based on real-time order data from dealers, and transformed the traditional "production determines sales" into "sales determine production".

At the same time, leading companies strengthened their collaboration with logistics companies, shortened the distribution radius through the layout of regional warehouses and distribution centers, and compressed the order response time in some core markets from 72 hours to 48 hours, further accelerating inventory turnover. ​

Distributor confidence rebounded: 500,000 sales targets anchor market potential​

The rebound in dealer confidence confirmed the industry's recovery trend from the market terminal. A large domestic tire dealer recently locked the annual sales target of a certain brand of all-steel tires at 500,000, which is nearly 20% higher than the actual sales last year.

The dealer manager revealed that the goal setting is not blindly optimistic: "Since June, the frequency of terminal pickup has increased significantly, especially for 12R22.5 tires commonly used in long-distance transportation, and the replenishment cycle has been shortened from 15 days to 10 days.

We predict through big data analysis that the market demand for heavy truck replacement will continue to be released in the second half of the year, and the goal of 500,000 is supported by solid terminal demand." ​

Channel strategy upgrade: value-added services and digitalization improve operational efficiency ​

This goal is supported by the optimization and upgrading of dealer channel strategies. On the basis of improving inventory turnover, many dealers have increased the construction of terminal service networks, and improved customer stickiness through value-added measures such as establishing tire testing centers and providing free tire replacement services.

At the same time, the application of digital tools makes inventory management more accurate. A dealer uses the ERP system to achieve real-time inventory monitoring, reducing the proportion of unsalable specifications from 15% to 8%, and significantly improving the efficiency of capital utilization. ​

Trend improvement: Multiple factors build an industry recovery support system ​

It is worth noting that the warming trend in July is not an isolated seasonal fluctuation, but a trend improvement after the industry's long-term adjustment.

From the perspective of upstream raw materials, the prices of major raw materials such as rubber and carbon black have stabilized recently, and the pressure on corporate production costs has eased, providing greater flexibility for terminal pricing; from the policy perspective, support policies such as logistics subsidies and smooth freight transportation issued in many places have continued to exert their strength, creating a good environment for commercial vehicle operations. These factors together constitute the support system for the recovery of the tire industry. ​

The foundation for recovery needs to be consolidated: a new industry situation with opportunities and challenges coexisting​

Of course, the foundation for the recovery of the industry still needs to be consolidated. The current increase in orders is still "small", and there is still demand differentiation in some regional markets, and the pressure on foreign trade exports has not been completely eliminated. However, it is undeniable that the positive trend of inventory optimization and order recovery in July has injected confidence into the development of the tire industry in the second half of the year.

With the continuous improvement of the collaborative efficiency of the industrial chain and the further release of terminal demand, the tire industry is expected to gradually move out of the adjustment cycle and move towards a new stage of high-quality development.