BEIJING (Sept. 16, 2011)—The tire statistics branch of the China Rubber Industry Association reports that its members face a severe test in the second half of 2011.
The challenges come from reduced demand for cars as well as rising raw material prices. Ongoing problems facing Kumho Tire Co. Inc.'s tire factory in Tianjin, China, which this spring mounted a voluntary recall of more than 300,000 car tires in the country, also play their part, the report said.
It also noted that bank interest rates are increasing, and this will add further pressure to local tire makers.
Production of car tires in the first six months reached 128 million units, of which 107 million were radial construction. This represents growth over the same period last year of 1.6 percent and 5.3 percent respectively. Revenues increased by around 20 percent, due to price increases, but tire inventories rose by 32 percent.
CRIA reported that production growth declined sharply. The industry also is concerned about increased expenses associated with the development of new-technology tires for low rolling resistance as well as the use of clean (EU-compliant) extender oil.
The association said the tire industry still recognizes the picture of three high and one low—that is to say production, sales, inventory and production costs are all high, but profits are lower. Member companies will have to adjust their product portfolios to increase profitability, the group said.
Some tire makers are operating at just 50 percent of capacity, the report added.