In the past, there were shadows of blowouts and special security cases in China's auto sales. The prices of raw materials rose sharply afterwards, the revaluation of the renminbi reopened, and the pressure for energy conservation and emission reduction increased. According to Cao Kechang, president of Cooper Tire Asia Pacific, the tire industry in 2010 is bound to be “complex and changeable,†and “blind expansion of production will only make China a factory of the world†is an unwise move.
Blind expansion or lead to price war
After experiencing the rapid development of the Chinese automobile industry in 2009 and becoming the world's best, at the beginning of the year, major auto makers also announced plans for capacity expansion in 2010 or even longer. The sales volume of the entire vehicle refers to 20 million vehicles. As one of the most important supporting parts for automobiles, will the tire industry also usher in a wave of expansion?
"Any industry, when the market grows 80% or 90%, will face the question of whether or not to invest." Cao Kechang said that this is very contradictory. He is worried about what to do if the market situation is not good next year after the expansion.
"Tire is a very profitable industry, so capacity utilization is very important. If capacity utilization is less than 90%, it will be over." He said frankly, "If you want to grab the market, if the factory's operating rate reaches 100%, this means that you have to bargain. "So he judged that the price war in the tire industry in 2010 will become more and more serious.
On the other hand, China's capacity as the world's largest auto market cannot be underestimated. Cooper, the main replacement tire market, also quietly calculated China's market capacity. “At present, the number of cars and cars is between 15 and 20 million. It is estimated that one car will replace 1.5 tires a year. It will take about a year. Produce 35 million to 40 million replacement tire markets. We are very optimistic about this market.â€
Therefore, Cooper has adopted a more compromised approach, which is to appropriately increase production capacity on the basis of the two major factories instead of building another one.
We have offset some of the rising costs by price increases, but it is not 100%. No tire company can reflect 100% of the raw materials up to the customers. Customers cannot accept them, so we say that part of our investment has been passed off. Rely on our sales increase and digest it. The price increase is about 4%-7%.
It's a mistake to take China as a factory in the world
“The strategy of investing in China as a factory in the world is obviously a mistake. It shouldn’t be.†Standing on the watershed of China’s economic development model, Cao Kechang’s China strategy for foreign-invested manufacturing is so judged.
The positioning of Cooper of the United States to the Asia-Pacific region is not "low-cost manufacturing" but can bring a large number of sales markets. In the cost structure of tires, raw materials and transportation account for a large proportion, and the low-cost manufacturing capabilities that China can provide cannot be the basis for long-term strategic advantages.
Cao Kechang told reporters that the future goal of Cooper's Asia Pacific region is to achieve domestic sales rather than export sales. The first goal is to ensure quality, and then it is necessary to expand sales in China. Although labor costs in China's tire industry still occupies no small advantage, Cao Kechang believes that this advantage cannot be relied upon and that quality is more important.
“The purpose of setting up a factory in China is to use the brand of the Chinese market, Cooper is not to regard it as a world factory.†In view of this, in addition to two manufacturing plants in Shandong and Jiangsu, Cooper tires will be the third largest R&D center in the world. Placed in Shanghai.
In the process of China's economic restructuring, Cooper clearly does not want to be a "follower." "China's energy prices are too expensive. We don't need the government to save energy and reduce emissions. We are subject to cost pressures. We also need to continuously reduce energy consumption." Cao Kechang expressed with worries that rubber prices, corporate electricity, and steam costs are near. These years have risen sharply, making tire companies have to face "cost pains."
"Market competition is so fierce, there is no competitiveness without reducing energy consumption." It is reported that the capacity of the Cooper Shandong plant has increased by 70% from 2007 to the present, but the energy consumption of each tire has been reduced by 50%.
Regarding the future of the Chinese tire industry, similar to the problems faced by other domestic heavy chemical industries, Cao Kechang also pointed out that “the concentration of the Chinese tire industry is too lowâ€. According to his calculations, there are more than 300 Chinese 3C-certified tire factories, and only 2 in the United States, where the automobile industry originated.
"The industry concentration is so low, resulting in quality problems, environmental protection can not meet the requirements." Cao Kechang suggested that the country should also carry out moderate mergers and reorganization guidance for the tire industry, increase the concentration of the industry. For him, he actually has a little selfishness. "In the tire industry merger and restructuring process, Cooper is not willing to be a spectator." Cao Kechang told reporters.
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