The incredible rise of the Chinese tyre industry has been the major phenomenon within our business over the past decade. Rather than seeking major overseas acquisitions, the Chinese have steadily arrived on the global stage through organic growth and via impressive investment in new factories and state-of-the-art capital equipment. Enterprises like Hangzhou Zhongce and Shandong Linglong are now not only well established as domestic forces but are becoming increasingly global tyre players.
It’s a commonly held belief that the Chinese tyre industry is export-led. But an incredible 24% of all global car production now takes place in China – so it’s logical why so many tyres are also being built there – primarily to satisfy the new ‘first generation’ Chinese drivers. As the domestic vehicle market expands, so more and more tyres are needed – both for OE and replacement. It’s also worth noting that the Chinese currently own 80 vehicles per 1,000 people – compared to more than 500 per 1,000 people in the UK – and China is already the number one car market in the world! But domestic growth is also there to support global ambitions and Chinese tyre brands are now becoming more visible worldwide, following a trend in almost every other consumer product.
Take a closer look at your mobile phone – the brand message may be ‘California’ or ‘Finland’ but it’s probably made in China. The same with your blu-ray player or laptop or 3D TV or even the wallet in you pocket. The brand is global but the production is in China.
Why China? Of course initially it was down to cost advantages but now, although input costs still play a major part, the country also offers improving quality and reliability. Just as several decades ago with its neighbour Japan or maybe later in the 1980s with Korea, China is emerging. Some fifty years ago when they first started to export to Europe, there was maybe a reluctance to buy ‘cheap Japanese’ and I remember the reactions approximately 20 years ago that Korean tyres were not perceived as good as ‘Made in USA’ or ‘Made in Europe’. That has all changed of course. The world’s leading tyre producer is Japanese and Korean tyre brands (like Hankook) are now globally respected.
So it looks to me that we are entering a new phase in the tyre industry. An era in which we will witness significant shifts – so-called a ‘generational change’. In a few years’ time the list of ‘Top 20’ tyre manufacturers could look very different to today. The European and North American tyre markets have matured. To see where change is really happening, it’s time to look further afield to where vehicle ownership is in its infancy and undergoing a rapid transformation and to consider how this, in turn, will influence the supply of new tyres and new tyre names across the globe. It’s an exciting change to be fully embraced. A change that can only help to deliver better choice, better quality and more buying power in the hands of you – the local tyre dealer.