① The tire industry is booming in 2023. Leading domestic tire industry companies will expand capital expenditure and accelerate overseas production capacity layout. ② Industry insiders said that by increasing overseas production capacity, domestic tire companies are rapidly increasing their global market share and have initially taken on an “international model”.
Financial Services Association, December 27 (Reporter Xiao Lianghua) Having tasted the sweetness of overseas layout, GM's (601500.SH) overseas base is expanding production again. This evening, the company announced the launch of the second phase of the Cambodia project to further expand production capacity.
A Finance Association reporter combed through and found that since 2023, with the rise in industry prosperity, leading companies in the industry such as Sailun Tire (601588.SH) and Morikirin (002984.SZ) have intensively expanded production capacity overseas. Among them, Sailun Tire has already been deployed in three countries: Vietnam, Cambodia, and Mexico, while Morikirin's overseas bases include Thailand, Spain, and Morocco.
Industry insiders said that cost advantages in raw materials, labor, etc., preferential tax policies, and proximity to the market are factors that domestic tire companies consider when choosing to go abroad. Up to now, the overseas bases of domestic tire companies have spread across the four continents of Asia, Africa, Europe, and North America, and are providing stronger and stronger support for related companies to increase their global market share. Leading domestic tire companies have initially taken on an “international model”.
Staging the “acceleration” of overseas production expansion
Since the fourth quarter of last year, under the influence of many favorable factors such as falling raw material costs in the tire industry, the return of shipping costs to normal, rising tire sales prices, and a recovery in sales, the tire industry's prosperity has improved, and domestic tire production has increased its capital expenditure efforts. However, the “internal volume” situation in the domestic market is still the same. This year, the pace of overseas factory construction by Chinese tire companies has accelerated.
This evening, GM Co., Ltd. announced that its wholly-owned Cambodian subsidiary plans to invest in the construction of a Cambodian high-performance radial tire project (Phase II). The production capacity includes an annual output of 3.5 million semi-steel radial tires and 750,000 all-steel radial tires. The total investment of the project was 1,495 billion yuan. After the project is delivered, the company's Cambodia base will have an annual production capacity of 8.5 million semi-steel radial tires and 1.65 million all-steel radial tires.
Gu Cui, chairman of the company, said earlier that the company has built tire factories in Thailand and Cambodia, and that the company's Thai factory maintains strong production and sales and full production capacity; the Cambodian base currently has zero double anti-tax rates for tires exported to the US, and the company's overall production capacity is continuing to rise at an accelerated pace to achieve full production by 2024. The company will continue to accelerate the international layout and promote competitive overseas production base site selection.
A little earlier, on December 15, Sailun Singapore and Mexico's TD signed a “Joint Venture Agreement”. According to the “Joint Venture Agreement”, the two sides plan to establish a joint venture in Mexico to invest in the construction of a project with an annual output of 6 million semi-steel radial tires. In the future, the joint venture is also considering building a project with an annual output of 1.65 million all-steel radial tires.
This is less than 2 months since the company just announced in October that it plans to invest 1,474 billion yuan to build a Cambodian project with an annual output of 6 million semi-steel radial tires. Previously, the company's bases in Cambodia and Vietnam had production capacity of tens of millions of tires.
Mori Kirin also continues to promote a global layout. The second phase of the company's Thailand “Morikirin Tire (Thailand) Co., Ltd. expansion project with an annual output of 6 million semi-steel tires and 2 million full tires” has been basically completed and is expected to be put into large-scale production in 2023; the construction of the “Spain 12 million tires per year project” at the European base and the “Morikirin (Morocco) project with an annual output of 6 million tires (Phase I)” in Africa is progressing at an accelerated pace.
On the evening of October 24, Morikirin announced that in order to give full play to Morocco's location advantage in international trade, the company plans to raise US$193 million to invest in the construction of a “project with an annual output of 6 million high-performance cars and light trucks radial tires (Phase II)” in Morocco.
Overseas production capacity construction for Linglong Tire and Guizhou Tire is also in full swing. Linglong Tire said earlier that in the company's overall business share, it will further reduce the share of domestic support in the future. At the same time, it is planned to rapidly increase the share of overseas support through the construction of overseas bases. Currently, the company team is conducting field visits, analysis and comparison of the third overseas base. Once the site selection is determined, it will be announced in the form of an announcement.
The “international model” takes shape
Chinese tire companies are speeding up their overseas expansion. Southeast Asia's Cambodia, Thailand, Vietnam and other places have become the first choice for domestic companies, and Europe, North America, and even Africa are receiving more and more attention.
“When Chinese tire companies go global, they will consider various factors such as supply chain safety, cost, and market.” A relevant person in charge of a tire company in Shandong told the Financial Federation that overseas profits are more lucrative because labor costs are lower and closer to natural rubber production areas. Furthermore, in recent years, the US government has been adopting various trade barrier measures for imported products from China, such as tariffs and non-tariff barriers, which have increased the difficulty and cost for Chinese companies to invest in the US. This is a passive factor for domestic enterprises to deploy overseas.
Judging from the financial reports already released this year, the profit margin on overseas production capacity of many tire manufacturers is more than 10% higher than domestic production capacity. According to financial data for the first half of the year, the gross margin of overseas sales of Linglong Tire (601966.SH) was 20.87%, the gross margin of overseas sales of Morikirin was 22.51%, the gross margin of overseas sales of Sailun Tire was 20.18%, and the gross margin of overseas sales of Guizhou Tire (000589.SZ) was 19.29%.
Sailun Tire stated in its announcement to invest in the Mexican plant that, on the one hand, the construction of this project will help the company provide faster and better market services to customers in North America, enhance sales business for former North American customers and develop potential North American customers; on the other hand, the construction of this project will further enhance the company's ability to deal with international trade barriers and is of great significance in enhancing the company's competitiveness and market share.
According to incomplete statistics from the Finance Association reporter, at present, more than 10 Chinese tire companies have built factories in Southeast Asia, including Zhongce Rubber, Linglong Tire, Sailun Tire, Senkirin, GM, Shuangqian Tire, Pulin Chengshan, Guizhou Tire, Chaoyang Langma, and Double Star Tire.
On the European side, Linglong Tire and Mori Kirin are heading to the layout. Africa and North America were the first to “break the ice” by Kirin Mori and the tournament, respectively.
“Currently, Chinese tire companies are rapidly increasing their global market share through rapid overseas factory construction. Although there is still a big gap between leading domestic tire companies and global tire industry giants, which can easily reach 150 billion yuan in revenue and 10 billion yuan in profit, they are getting closer. It can be said that we have already seen their backs. In particular, some of the fastest-moving companies have initially taken on an international model.” The industry insider mentioned above said.