Tire Firms Tackle Cost Woes

Industry Dilemma: Tire Raw Material Prices Continue to Rise, Putting Pressure on Manufacturing Costs

The domestic tire industry has recently been facing unprecedented cost challenges. The continued rise in core raw material prices has directly driven up product manufacturing costs, placing significant pressure on industry development.

As a key raw material for tire production, the price of natural rubber is impacted by multiple factors, resulting in tight supply and high prices. Globally, climate change has led to unstable production in major rubber-producing regions, and reduced planted area in some areas has further exacerbated the supply gap. Meanwhile, a gradual recovery in downstream demand has continued to drive market demand. This imbalance in supply and demand has led to a continuous rise in natural rubber prices.

According to industry monitoring data, as of August 28, the price of the main rubber contract had approached 17,000 yuan/ton, reaching a nearly two-year high. From the supply side, Thailand, a major natural rubber exporter, saw a significant year-on-year decline in its combined exports of natural rubber and mixed rubber in the first seven months of this year, with exports to the Chinese market experiencing an even more significant decline, directly impacting the stability of the domestic rubber supply chain.

At the same time, prices of other core raw materials required for tire production have also risen, further increasing the cost burden on companies. Taking carbon black as an example, driven by rising upstream raw material prices and tightening environmental protection policies, carbon black market prices across all regions have shown a significant upward trend.

As of August 28th, the price of the mainstream N330 carbon black model had increased by 300-500 yuan per ton. The simultaneous rise in prices of multiple raw materials has created a "cost accretion effect," exacerbating manufacturing cost pressures for tire companies and severely squeezing profit margins.

Market Challenge: The Double Squeeze of Cost and Demand in the Truck and Bus Tire Sector

Among the tire market segments, the truck and bus tire sector has been particularly impacted by rising costs, coupled with the dual pressures of sluggish market demand. 

This has left companies caught in a dilemma: it's difficult to raise prices, but even more difficult not to. On the one hand, from the market demand side, the domestic logistics and transportation industry is currently undergoing a period of adjustment. Fluctuating freight volumes and rising transportation costs in some regions have increased operational pressures for truck and bus owners, significantly reducing their willingness and frequency to replace tires, and contributing to continued sluggish market demand.

This sluggish market environment leaves little room for upward price adjustments for truck and bus tires. Any rash price increases by companies could lead to customer loss and a decline in market share, further exacerbating operational pressures.

On the other hand, the continued rise in costs has severely eroded corporate profits. For example, the production cost of the mainstream 12R22.5 truck and bus tire model has increased by approximately 55 yuan per tire due to rising raw material prices alone.

For large-scale companies, this cost increase will create significant short-term pressure. If these costs cannot be absorbed rationally, profits will plummet, and companies may even face the risk of losses. This market landscape of rising costs and weak demand has left truck and bus tire companies in a difficult position. Balancing costs and market demand has become a core issue that demands urgent resolution.

Breaking the Gap: Companies are making multi-faceted efforts to uphold the bottom line of quality and service.

Faced with the dual challenges of cost and market demand, domestic truck and bus tire companies have not been passive. Instead, they have proactively explored solutions. While strictly controlling costs and optimizing products, they have remained committed to providing high-quality products and services to the market, striving for sustainable development.

In terms of cost control, some companies are leveraging the production adjustment window to conduct systematic equipment overhaul and maintenance, while also comprehensively streamlining and optimizing existing production processes.

By incorporating lean production philosophies, they are reducing material waste, improving equipment efficiency, and optimizing staffing, tapping into cost potential throughout the production process and striving to reduce unit manufacturing costs without compromising product quality.

For example, some companies are implementing intelligent transformation of their production lines, enabling real-time monitoring and dynamic adjustment of production data. This not only improves production efficiency but also reduces energy consumption and raw material loss, effectively alleviating cost pressures.

In terms of product innovation, companies are increasing R&D investment, focusing on the core needs of truck and bus users and developing new products with high cost-effectiveness and high performance. For example, General Motors' 2024 Longma series ET new energy green tires, through comprehensive optimization and upgrades to the tire structure, rubber formula, and tread materials, have achieved significant breakthroughs in product performance.

Not only does it offer lower rolling resistance, helping to reduce fuel consumption, but it also significantly improves tread wear resistance, extending tire life, and effectively reducing operating costs for truck and bus users. These innovative products not only meet market demand for high-quality tires, but also help companies gain more market share through differentiated competition.

In addition, some strong companies are actively expanding into overseas markets, diversifying their operational risks through a "dual circulation" strategy. Leveraging the relatively stable demand and pricing structure of overseas markets, they are expanding truck and bus tire exports, using profits from overseas markets to feed back into domestic operations and provide more sufficient financial support for the domestic market.

This allows them to maintain product quality and service levels in the domestic market, avoiding compromising product standards due to cost pressures.