China’s tire industry is facing an unprecedented change, currently showing a “vegetable market melee” situation.
Walk into any tire store, and you’ll find a variety of tires ranging from “white brand” tires priced at 299 yuan a piece to high-performance tires priced at 3,999 yuan.
The technical threshold for this industry is so low that even outsiders think, “I can do it even if I’m good at it.”
The result is that production capacity is expanding wildly, manufacturers are fighting price wars to their death, and consumers are dazzled.
The technical barriers to the tire industry are staggeringly low.
First of all, you can buy equipment. Internal mixers, vulcanizers, molding machines, and complete production lines can be purchased from equipment vendors in Qingdao and Wuxi. You can open a factory with an investment of tens of millions.
Secondly, the formula can be copied. The basic formula of rubber, carbon black, and steel cord has not changed much in decades. With slight changes, “new products” can be produced.
Furthermore, you can put on a brand, give it a foreign English name, register a trademark, find a small factory to manufacture it, and a “new brand” is born.
Such a low threshold has led to the number of tire factories in China once exceeding 500, and China accounts for half of the top ten production capacities in the world.
However, less than 20 of them actually have R&D capabilities, and the others are all “assembly plants” and “OEMs.”
The direct consequence of low threshold is serious overcapacity.
According to statistics, China’s all-steel tire production capacity utilization rate will be less than 70% in 2025, and semi-steel tire production will only be about 75%.
Thirty percent of production capacity is idle, but new projects are still being launched.
In order to grab orders, manufacturers can only engage in price wars.
For a 299 yuan car tire, excluding raw materials, labor and freight, the profit is less than 10 yuan; the billing period has been extended to 180 days, and the cash flow of small factories is tight, so they continue to reduce prices in order to collect payment, creating a vicious circle; export prices are “cabbage prices”. In the Southeast Asian and African markets, Chinese tires are cheaper than local brands, resulting in frequent anti-dumping investigations.
This is not competition, this is self-harm. In the end, no one can make money, and the overall profits of the industry are as thin as paper.
Tires are not socks, they are important components related to life safety.
The only thing a car has in contact with the ground is its four tires, which determine braking distance, handling stability and risk of puncture.
Using low-quality tires means losing your life and saving money.
The industry reshuffle has begun, but natural market elimination alone is too slow, and technology and quality access must be used to accelerate it.
Specifically, the first is the upgrade of safety standards. The EU’s tire labeling laws (rolling resistance, wet grip, noise) have been implemented. China should also follow up and kick C- and D-class tires directly out of the market.
The second is to link R&D investment, setting thresholds for the proportion of R&D expenses and the number of patents of enterprises, and “assembly factories” without technology will not be given production qualifications.
The third is dynamic spot checks + recalls, following the example of the automobile industry, which imposes mandatory recalls on unqualified products, with fines that can lead to bankruptcies.
Only by welding the threshold to the six words of “technology, quality, and safety” can enterprises be forced to shift from “fighting on price” to “fighting on performance.”
After the low-end production capacity is cleared, the market will be left with truly skilled players.
The track for future tires has become clear, including special tires for electric vehicles, which must have low rolling resistance (increased battery life), high load capacity (heavy battery), and silent (low motor noise); self-repairing/pneumatic-free tires, which are nail-pierced and air-tight, solving the biggest pain points for users; and smart tires, with built-in sensors, which can monitor tire pressure, temperature, and wear in real time, and the data can be transmitted directly to the vehicle.
Companies without R&D capabilities simply cannot succeed in these tracks.
A “supply-side reform” in the tire industry is imperative.
The tire industry is shifting from “scale competition” to “technology competition.”
Those who will survive in the future will not be those with the greatest production capacity, but those with the strongest technology.
This is a good thing for consumers – for the same money, they can buy safer, more durable and smarter tires.
The industry is undergoing a major reshuffle. What is washed away is the silt, and what is left is real gold.
