BEIJING—China's top tire makers saw their sales drop in the first half of 2020, but the losses weren't as severe as those suffered by the world's biggest tire companies.
China's 11 major listed tire makers, including Linglong, Doublestar, General Science and Aeolus, recorded overall sales of $5.6 billion during the first half of 2020, down by 11 percent from a year ago.
This compares with a 23 percent drop in sales to $44 billion for eight of the leading tire manufacturers globally, including Bridgestone, Michelin, Goodyear and Continental, according to the China Rubber Industry Association.
"Chinese and foreign (tire makers) have been going on different tracks since April," said CRIA deputy chairman and secretary general Xu Wenying at a Chinese online conference on Sept. 9. "The EU and Americas saw rather low utilization rates, while China's rates have been picking up month by month."
The global leaders, excluding Continental whose earnings are not available, posted a $1.8 billion net loss during the first half 2020, compared with a $2.7 billion net profit a year ago.
The Chinese manufacturers, however, showed only a 23 percent fall year-on-year in net profit, to $261 million. In addition, gross profit margin of the Chinese companies rose by 0.7 percentage points from the first half of 2019, to 20 percent.
The figure, Xu said, compares against a 4.4 percentage point drop in the global leaders' profit margin to 23.6 percent.
Additionally, Chinese producers had a smaller decrease in net cash flow—down by 6 percent to $691 million—whereas global leaders' net cash flow shrank by 71 percent to $844 million.
It is still a gloomy scenario for the whole year. CRIA estimates that China's total tire production in 2020 will arrive at 542 million units, down by 17 percent from 2019.
According to Xu, Chinese tire makers still need to take notes from global leaders' practices, which have shortened the demand feedback cycle to one week to avoid inventory overload.
Furthermore, global players are in close talks with car makers to make adjustments in manufacturing, and have been tracking market dynamics to prioritize products with stronger demand, better profit margin and higher cash flow, she added.
As auto makers look to curb costs during the coronavirus pandemic, an opportunity lies ahead for Chinese tire companies to become OE suppliers, if they can provide competitive products at lower prices, Xu said.
Pointing to plans by Bridgestone and other international manufacturers to put capital expenditure on hold, Xu urged "equal prudence" for Chinese companies.
Another difference, she observed, is: "Chinese tire makers like to spend money building new plants or taking over bankrupted facilities for expansion, whereas overseas companies more often acquire businesses along the supply chain."
This, she said, offers global manufacturers lower costs, easier quality control of raw materials and better synergies.