ESSEN, Germany—The Chinese government is trying to reduce tire production by around 40 percent in a bid to address overcapacity in the sector, according to Mary Xu of the China Rubber Industry Association (CRIA).
The government's consolidation drive will focus largely on reducing the large number of smaller tire makers in China, said Xu, speaking at the Future Tire Conference 2016, which was organized by European Rubber Journal and held May 24-25 in Essen.
“The Chinese government is worried about the situation, not only in the tire industry but also in other industries,” she explained to delegates. “Many industries in China have overcapacity after the past 10 or 20 years of the rapid growth of the Chinese economy.”
China's industry ministry, she said, has carried out a major project to develop ways to regulate tire manufacturing in China. These will place tougher requirements particularly on smaller companies and new entrants in terms of emissions, energy efficiency and the environmental impact of tires being produced.
“The Chinese government wants to use these regulations to cost about 40 percent of the total tire production in the next three or four years,” Xu went on to say.
The CRIA, meanwhile, is promoting the introduction of tire label regulations in China. This, said Xu, will show Chinese consumers which tire is better and help them choose tires that are most suitable for them.
“Smaller manufacturers [might] not have enough money for the research or for testing and so they cannot use the labeling on their tires,” she said. “Then the consumers in China will not buy those tires. And this will promote the disappearance of these tires.”
Summing up, Xu said: “China cannot develop using the past ways. We want to consolidate [and get] the bigger tire companies to cooperate together. Tire makers will be investigated for the pollution, energy [costs] and other aspects. We want to [reduce the number of] smaller tire manufacturers.”
Asked about overseas investment plans among Chinese tire manufacturers, Xu said that in recent years about seven large players had set up plants abroad. A favored destination was Thailand because of its natural rubber resources and labor costs that are comparable to those in China.
Xu, however, does not see this as a major trend among all Chinese tire manufacturers: “Going abroad not only needs money but also international employees. For Chinese companies the main problem is the language because we do not speak English fluently. This is a problem for management and companies.”
On the other hand, she said that the export market “is very important for those big tire companies. So they need to go abroad to build factories. But those companies that focus on the local Chinese market they do not need to go abroad.”