Linglong Tire has pressed the termination button on the Tongchuan project this time. On the outside, it looks like a paper announcement, but inside it involves five years, an initial investment of 380 million yuan, and an expansion plan that originally stated a total investment of 6.066 billion yuan.
From approval to termination, a project is not completed in the middle, but comes to an end first. If this happens to a listed company, investors will naturally stare at it, because the money is real money and the rhythm is real business.
In June 2021, Linglong Tire’s board of directors and shareholders’ meeting successively approved this plan, which is located in the Dongjiahe Circular Economy Industrial Park in Tongchuan, Shaanxi. The goal is to build an annual output of 15.2 million sets of high-performance radial tires and 500,000 sets of retread tires.
The thinking at the time was not difficult to understand. The northwest market needed to be filled, the logistics radius needed to be shortened, Central Asia also needed to be considered, and the local industrial chain also wanted to take advantage of the situation to move forward. The logic of the project on paper was complete, and the expectations on the books were clear.
According to the calculations disclosed at the time, the project was expected to have annual revenue of 6.345 billion yuan and annual net profit of 457 million yuan after completion. These figures were placed in the industry atmosphere at the time, and it was indeed easy for people to feel that the direction was smooth and the rhythm was right.
But five years later, the project has not entered the harvest stage, but has reached the stage of termination. The explanation given in Linglong Tire’s announcement is not complicated. The early preparations have been slow, and the relevant supporting facilities have not been implemented as planned.
These words were said calmly, but behind the scenes it was not easy. The project was dragging on, and the market had changed its face.
The path that the tire industry has taken in the past few years is quite different from the judgment in 2021. At that time, many companies were expanding production. What everyone saw was the demand space and focused on the production capacity gap. Everyone wanted to occupy the position first.
Later, the pace of the industry changed, the domestic market gradually came under pressure, production capacity was released intensively, price competition increased, operating rates declined, and the gap between enterprises also widened. The revenue model originally written in the plan began to face the new reality.
In 2025, domestic pneumatic rubber tire production will reach 1.207 billion units, and total automobile tire production will decline by 1.59%. This set of data illustrates the fact that the industry has shifted from pursuing expansion to digesting supply.
By 2026, new production capacity will continue to be implemented intensively, and the export side will be under pressure. Some of the supply originally intended for overseas will flow back to China. The market’s capacity to undertake cannot keep up, and competition will naturally squeeze forward.
At this time, if we promote a 6 billion yuan expansion project, the pressure will fall on cash flow and profit expectations. Terminating the project will become a stop-loss action.
This kind of action is not decent, but it is pragmatic. Enterprises do not have to continue on the road that has already seen deviations, especially in heavy asset industries. Once the direction is misaligned, the subsequent costs will continue to amplify.
Linglong Tire is not a company that lacks capabilities. It has its own position in the tire industry, and its global supporting business is also advancing. The supporting volume of passenger cars, trucks and buses, and off-highway tires is growing, and there is also progress on the technical side.
It can produce high-performance products and 63-inch all-steel giant tires, and it also has plans in the fields of dandelion rubber and air-free tires. These all illustrate the company’s basic capabilities.
But the basic skill is that it does not mean that every project can be implemented. Whether the project can go ahead depends not only on the technology and scale, but also on whether the local supporting facilities, logistics, manpower, and upstream and downstream supply chains can handle it.
The Tongchuan project is stuck in these links. If the supporting facilities are not in place, the pace of implementation will be slow. As time goes by, the external environment will also change, and the accounts that were originally reasonable will become difficult to calculate.
The tire industry has a characteristic: large investment, long cycle, and slow recovery. The early stage looks like a layout, but the later stage often depends on business resilience. It is easy to regard expansion of production as the answer based on temporary judgment alone.
This is also a realistic observation left to the market by this incident. Expansion of production is not the original sin. Blind expansion will lead to deviations. Enterprises can move forward when they see opportunities, but they must clearly calculate the boundaries.
From the perspective of another faction, Linglong’s termination of the Tongchuan project is not only a passive contraction, but also an adjustment in resource allocation, prioritizing the capacity utilization, intelligent upgrades, and global layout of the existing base.
This judgment is not drastic, but it has a basis in reality. What the tire industry is competing for now is not who has the loudest slogan, but who can connect products, technology, costs and channels. If you simply pile up production capacity, the returns may not keep up with the investment.
There is also a view in the industry that the suspension of the Tongchuan project does not mean that Linglong has lost interest in the northwest market, but that it has changed its entry method, holding on to its existing business first, and then looking at a more suitable investment pace.
This idea is different from the past strategy of building the market first and then talking about returns. The former places more emphasis on operational quality, while the latter is more focused on scaling up. As the industry reaches today, the weight of the former is increasing.
Looking at this matter in the entire tire industry, the signal is not limited to Linglong. In recent years, many companies have been re-evaluating their production expansion plans, especially making choices between building overseas factories and new domestic projects.
A consensus has begun to emerge in the market that the competitive entrance of the tire industry has changed. Production growth alone is no longer enough. Product structure, R&D capabilities, channel stability, and capital turnover efficiency are all becoming watershed.
High production capacity does not mean stable profits, large projects, nor does it mean that returns will be in place. Companies that can truly stand are those that can improve the efficiency and quality of each production line.
The initial investment of 380 million yuan this time is not a small amount, and it will not break the bones in the size of Linglong Tire, but its significance is not in the money itself, but in the fact that the money bought a clear reminder.
What should I remind you? Remind companies not to regard periodic enthusiasm as certainty in the growth cycle. Remind the capital market not to regard the income in the plan draft directly as future cash flow.
The story of the tire industry has never been about whoever runs fast wins, whoever sees things steadily, who can live longer, whoever can contain risks in advance, whoever can go through cycles after cycles.
This time, Linglong Tire has stopped the project, which shows that the corporate level has begun to recalculate the accounts and is willing to put the unfinished expansion back into reality and re-examine it. This is more rational than rushing forward.
As the industry extends here, we can see several directions. First, the implementation of local projects cannot only rely on approval documents. Supporting facilities, transportation, raw materials, and collaborative capabilities must be evaluated simultaneously. There is often a gap between paper models and actual implementation.
Second, the overseas layout of tire companies cannot only depend on the transfer of production capacity, but also on the order structure, trade environment and regional supply relations. Once the external environment changes, the original expectations will be rewritten.
Third, the focus of competition in the future will continue to be high-end, green, and intelligent. Companies that can produce differentiated products will be more proactive than companies that simply pursue scale.
Fourth, industry clearing will continue to advance, and leading companies will receive more resources. If small and medium-sized enterprises do not have core capabilities, their living space will continue to narrow.
Fifth, the internal judgment mechanism of the company must change accordingly. When establishing production expansion projects, we should not only rely on optimistic estimates, but also include the worst-case scenario in the calculations to leave room for exit.
Sixth, when the capital market looks at the manufacturing industry, it should not just look at the story, but also the ability to implement it, especially in asset-heavy industries. If a project is delayed for three to five years, the capital occupation and opportunity cost will be heavy.
Seventh, for leading companies like Linglong, what is truly valuable next is not a single point of scale, but the revitalization of existing assets and the connection between technological investment and operating returns.
The reason why this kind of incident can attract readers is that it is not an abstract discussion, but directly puts the choices of a large enterprise into the logic familiar to ordinary people. Investment, management, stop loss, and steering don’t sound far away.
After reading this, many people will interpret it as a company’s project failure. In fact, it points to a change in the stage of an industry. The impulse to expand is retreating and business patience is advancing.
During this period, the tire industry will not be easy. Price competition is still there, pressure on production capacity is still there, and project screening will become stricter. No one can obtain stable returns with just one expansion of production.
Linglong Tire terminated the Tongchuan project this time, and what was left was not a lively ending, but a calmer business attitude.
380 million yuan has been paid, the 6.066 billion yuan plan has been terminated, the Tongchuan project is no longer moving forward, but the industry is still moving forward.
Such changes in the capital market will always lead to different opinions. Some people see stop losses, some see losses, and some see a new starting point after adjustment.
If you want to differentiate your position in the comment area, you often end up here. On one side, you look at the cost of expanding production, and on the other side, you look at the revised direction of the leader.
