YANTAI, China—With pressure to meet growing demand, Linglong Tyre announced in February its new 5+3 strategy, envisioning five plants in China and three overseas, compared with its 3+3 strategy from a year earlier.
Last year, Linglong reported a 32 percent jump in revenue to $1.97 billion, half of which came from the overseas markets.
Net profit less non-recurring items rose by 6 percent to $145 million, making it one of the few Chinese tire makers that saw an increase in profitability.
Overall gross margin rate, although down by 4 percent to 24 percent, is still considerably higher than the average of seven listed Chinese tire makers at 18 percent.
The company sold a record high of 49 million tires last year, up 16.4 percent from 2016 worldwide, and last year was China's largest passenger car tire maker and second-largest truck and bus tire maker.
OE supply 'firsts'
Linglong claims to be the first Chinese tire maker to become a global original equipment supplier to world-class brands such as Volkswagen, Ford and Nissan, with its original equipment sales raised by 52 percent to $644 million in 2017.
The firm has two plants in its headquarters province of Shandong, one in south China, and one in Thailand operational since 2014.
Its de facto annual capacity has reached 48 million passenger car tires, 8 million truck and bus tires and 1 million bias tires. Aside from the the bias tire facility and one project in Shandong suspended due to environmental regulations, all of the company's facilities had over 85 percent capacity utilization rate in 2017.
On account of such pressure, in February Linglong revealed a plan to build a fourth China site with nearly 14.5 million unit total annual capacity and $803 million investment in Jingmen, located in Central China.
The company also is expanding its existing sites to add at least 6 million units of annual capacity by the end of 2018. Details of the other three projects, including one in the U.S. and one in Europe, have not been disclosed. Smart manufacturing machinery will be installed at all new plants.
Linglong estimates its total production will reach nearly 58 million units this year, with a 12 percent rise in revenue and a 10 percent rise in net profit. It also predicts a 20 percent yearly growth rate in production and sales volume over the next few years.
Part of Linglong's confidence comes from its growing research ability. Over the past few years, Linglong has set up research centers in Beijing, Germany and the U.S. to pool new talents, coordinating with its headquarters to work on new product development as well as cutting-edge areas such as dandelion rubber tires, graphene-compound tires and 3D printing.
Last year the company relaunched a premium label Atlas, a U.S. passenger car tire brand it had acquired and upgraded, and states its performance is on par with or better than international brands.
Linglong also invested $4.3 million to set up a subsidiary dedicated to dandelion latex research and also formed strategic alliance with over a number of universities and institutes to spur innovation in this area.
A further initiative announced last November revealed that Linglong will be heading three relevant projects: snow tires using dandelion rubber, heavy duty tires using gutta-percha and passenger car tires using bio-based itaconate.
On graphene-compound tires, Linglong has been able to lower the cost for graphene oxide production and developed its rubber latex compound. Application research on formula for heavy duty tread, sedan tread and engineering tread has been conducted, and progress has been reported in improving tire puncture resistance.