The “7+5” global production capacity layout that Linglong Tire, the leading domestic tire company, has previously been vigorously promoting has encountered a major Waterloo recently. Two major domestic tire investment projects have been terminated, and the overseas plan to build a factory in Brazil has been stopped at the same time. Superimposed disclosure violations have received regulatory warning letters. Multiple negative news has hit simultaneously, and the pace of corporate expansion has officially come to a sudden halt.
Behind the expansion and contraction is the current situation that Linglong Tire’s operating fundamentals continue to weaken and the pressure on the profit side continues to increase.
In 2025, the company was stuck in the dilemma of “increasing revenue without increasing profits”, and its performance in the first quarter of 2026 saw a cliff-like decline in profits. At the same time, the company also faced debt repayment pressure caused by high interest-bearing liabilities.
Under the resonance of multiple negative factors, the company’s secondary market stock price continues to fall. Although it has successively launched share buybacks and large shareholding increase plans by controlling shareholders in an attempt to stabilize market confidence, it has not reversed the downward trend of stock prices. Multiple difficulties such as setbacks in production capacity expansion, sharp shrinkage in profits, debt pressure, and lack of market confidence still need to be resolved one by one.
Projects have failed one after another, and the globalization strategy has suffered setbacks
On May 11, 2026, Linglong Tire issued an announcement announcing the official termination of the Shaanxi Tongchuan project that had been planned for nearly four years.
The project was initially planned in 2021. It was originally planned to build an annual production line of 15.2 million sets of high-performance radial tires and 500,000 sets of retread tires, with a total investment budget of up to 6.066 billion yuan. It was originally regarded as an important pivot for the company to radiate the northwest market and expand overseas incremental space through Central Asia. It was eventually terminated due to “slow progress in early preparations and the failure of relevant supporting measures to be in place as scheduled.”
In fact, the project had undergone major changes as early as October 2025, but until investors asked about the project progress in March 2026, the company still responded on the interactive platform that the construction progress would be advanced in accordance with the overall strategy and market conditions.
The six-month delay in information disclosure attracted regulatory intervention. On May 22, the local Securities Regulatory Bureau issued a warning letter to Linglong Tire, clearly stating that the Tongchuan project’s failure to disclose major changes in a timely manner violated the relevant regulations on information disclosure of listed companies. The company’s chairman and secretary were given major responsibilities and were issued a warning letter and recorded in the securities and futures market integrity files. On the same day, the exchange also issued regulatory warnings to the company and relevant responsible persons.
It is worth noting that the project has not yet entered the substantive construction stage, and the preliminary planning and preparation alone has cost approximately 380 million yuan. There is currently a possibility that this fund cannot be recovered in full.
The progress of the Anhui Lu’an project and the Brazilian project simultaneously disclosed in the same announcement is hardly optimistic: the Anhui project was initially located in Lujiang County, Hefei in 2021, but was later changed to Lu’an High-tech Zone in 2023 due to insufficient local energy consumption indicators. It plans to build a high-performance radial tire project with an annual output of 14 million sets and a 30,000-ton waste tire resource recycling construction project. A total of approximately 140 million yuan has been invested so far, but
Only the construction of the living area and some supporting facilities has been completed, and the main workshop is still in the planning and design stage and cannot be advanced as planned; the overseas Brazil project originally planned to produce 14.7 million sets of various high-performance radial tires and a 35MW photovoltaic power station annually. As of the time of the announcement, the two parties were still negotiating on core terms such as shareholding ratios and had not yet entered the substantive construction stage. On May 27, the company officially announced the termination of the overseas investment project.
At this point, Linglong Tire’s high-profile “7+5” global layout strategy (seven domestic production bases and five overseas production bases) has been obviously frustrated. Currently, the company has only five domestic production bases and only two overseas ones in Thailand and Serbia. There is a big gap with the original plan.
Behind the strategic contraction is the severe test of overcapacity that China’s tire industry is facing: in 2025, the national pneumatic rubber tire production will reach 1.207 billion units, and the total output of automobile tires will be 834 million units, a slight decrease of 1.59% year-on-year; the export volume of automobile tires will be 472 million units, a slight decrease of 0.64% year-on-year. Both internal and external demand are weak, and industry competition is becoming increasingly fierce.
In this regard, Linglong Tire stated that the next step is to focus on the intelligent upgrading of existing bases, improve production capacity utilization, and achieve flexible deployment of production capacity at each base.
Performance and debt are under double pressure, and market confidence needs to be restored
The other side of the strategic contraction is Linglong Tire’s significantly under pressure operating performance.
Financial data shows that the company’s operating income for 2025 was 24.642 billion yuan, a year-on-year increase of 11.72%, but the net profit attributable to the parent company was only 1.369 billion yuan, a year-on-year decrease of 21.88%. While the revenue side rose steadily, the profit side turned downward, and “increasing revenue without increasing profits” became the main line of operations throughout the year.
The decline in profitability is particularly obvious in the gross profit margin indicator: the company’s overall gross profit margin in 2025 will be 17.03%, narrowed by 5.03 percentage points from 22.06% in 2024, of which the domestic sales gross profit margin will be 1
4.35%, only a slight decrease of 0.25 percentage points year-on-year and basically remained stable; however, the gross profit margin of exports and overseas sales, which are the company’s core profit sources, was 19.63%, a sharp decrease of 9.76 percentage points year-on-year and almost halved, which directly dragged down the overall performance.
Entering 2026, the profitability situation has further deteriorated. The first quarter financial report shows that the company achieved operating income of 6.057 billion yuan, with a year-on-year growth rate slowing to 6.33%; attributable net profit only recorded 16.8935 million yuan, a year-on-year plunge of 95.04%; excluding non-net profit, it turned into a loss of 26.8959 million yuan, a 109.62% decrease from the same period last year.
The company explained that the sharp drop in profits in the first quarter was mainly affected by exchange rate changes. It incurred exchange losses in this quarter, compared with exchange gains in the same period last year.
While overseas expansion has suffered successive setbacks and profitability continues to decline, corporate debt pressure is also prominent.
As of the end of the first quarter of 2026, the company’s total interest-bearing liabilities were approximately 14.3 billion yuan, including 4.941 billion yuan of short-term borrowings, 2.625 billion yuan of non-current liabilities due within one year, and 6.727 billion yuan of long-term borrowings. During the same period, monetary funds were only 3.892 billion yuan. There was an obvious short-term debt repayment gap. With an annual profit of less than 1.4 billion yuan, it carried more than 14 billion yuan of interest-bearing liabilities, and the repayment pressure was considerable.
In order to stabilize market confidence, Linglong Tire reviewed and approved the repurchase plan on May 11, and planned to repurchase shares for 200 million to 300 million yuan, part of which will be used for employee stock ownership plans or equity incentives, and part of which will be used for cancellation and capital reduction; on May 20, it announced that the controlling shareholder planned to increase its shareholding in the company within 6 months, with the amount not less than 180 million yuan and no more than 230 million yuan.
However, market confidence has not been significantly restored. Since May, the company’s stock price has been falling from about 13.2 yuan at the beginning of the month to closing at 10.4 yuan as of June 25. The cumulative decline during the year reached 28.23%. It remains to be seen how the company will solve the multiple difficulties in the future.
