The pandemic has put on hold the global expansion plan that tire maker Zhongce Rubber Group Co. Ltd. outlined earlier this year, according to Richard Li, the global marketing director of the Hangzhou, China-based company.
Li told Tire Business the pause is a result of "the uncertainty of the future market demand," as the pandemic also left the company unable to visit potential locations for another facility. Meanwhile, he said that raw-material shortages and logistics continue to cause difficulties.
What would you like your customers to know about how your company handled the pandemic?
The COVID-19 pandemic brought great trouble for the supply chain, mostly the shipments as the sea freight rockets to extremely high, almost four or five times compared to normal days.
Meanwhile the raw-material cost is quite expensive. Therefore, we would like to say the inflation is unavoidable and the tire prices will continue to increase in the coming months.
Zhongce Rubber Group has outlined a global expansion plan, which could include manufacturing in the U.S. How is that process coming along?
The pandemic forced us to pause the investment plan due to the uncertainty of the future market demand. The current situation also banned our visit to potential locations of our future plants.
However, we still keep the plan to produce tires locally to supply to the local market, but not export from China only.
ZC recently announced historic sales growth. What factors have driven that success?
As mentioned before, the pandemic brought great trouble to the global supply chain. But on the one hand, we are still vigorously expanding the diversified market, especially the deepening of the OTR, agriculture, ST trailer segments.
On the other hand, we provide multi-channel marketing support including websites, social media and dealer conferences to further enhance brand awareness and help our dealers gain more market share. And such efforts have been successful in China.
Do you expect any supply difficulties in the second half of the year?
There will be no difficulties for the supply of raw material or the production of tires. However, the sea shipment situation definitely will bring great trouble for distribution.
Have the difficulties at ports directly impacted business?
Absolutely! Just explained above, but until now, we have no hope until later Q3, based on our shipping agent's information.
What are some of the pleasant surprises you are seeing?
We are expecting a strong recovery of the economy after most people are vaccinated. However, we have to wait for the production and distribution of vaccine. There is hope ahead but we need more time.
What kind of trends are you seeing? How is your company reacting? What sector offers the most potential?
For the consumer tire segment: the market needs more large-rim tires for the modern new SUVs, more low rolling resistance tires for EVs (especially in Europe and China) and more upgrading of UHP tires with excellent performance for traction and mileage.
Do you expect to roll out any additional products in 2021?
New products will be launched at SEMA 2021, and we will have an official announcement.
ZC plans to build the ZC Rubber Digital Brain, a smart network platform. How will this benefit operations?
The Digital Brain is focusing on the production process management, improving the quality and reducing the cost. The introduction of the system helps to reduce labor cost greatly, too. Now we are pushing the upgrading, and it is expected to be fully operational by the end of September.
What has been the overriding factor for price increases in the industry?
Raw material costs dropped to bottom because of the pandemic in Q2 2020 but soon started quickly to increase due to the shortage of supply, the demand from economic recovery, as well as the flooding of U.S. dollars.
Today the costs of raw materials are 10-30 percent higher compared to the ones by the end of year 2020. Furthermore, the rocketing logistic expense brought up the cost of tire manufacturers, too. For international suppliers, they are also suffering the depreciation of the U.S. dollar against local currency.
Do you expect any other major investments in the next six months or year, in either personnel, distribution facilities or capacity expansions?
Actually, we worried about the future investment of expansion for most tire manufacturers. The real demand from the market did not increase very much but quite a few tire companies are planning to increase the capacities in the coming years. We'll still wait and see whether the expansion can be absorbed by the market.
How important is the North American market to ZC success? How much potential is there for growth?
North America, obviously, is an important market for ZC Rubber, occupying nearly 10 percent of our total revenue. We are satisfied with the current market share but plan to invest more on the sales and service teams to build up the brand image and customer satisfaction.
We are devoted to developing safe and valuable products to consumers and end users all over the world and hope to help all customers save on their total cost for tires.