Large-scale deployment of production capacity projects at home and abroad, many major investments have been terminated one after another, and hundreds of millions of capital expenditures have been blocked. The warning letter recently issued by the Shandong Securities Regulatory Bureau revealed the tip of the iceberg of Linglong Tire’s (601966.SH) failure in foreign investment.
As a green and low-carbon tire enterprise integrating tire design, development, manufacturing, sales and service, Linglong Tire mainly produces passenger and light truck radial tires, truck and bus radial tires and off-highway tires. Its products cover passenger cars, commercial vehicles, engineering machinery and other fields.
The company plans to build a production capacity layout of 7 domestic factories and 5 overseas factories to be close to the supporting service radius of the OEM.
However, in recent years, radical capacity expansion has not translated into performance increases. Instead, it has given rise to a series of problems such as unfinished projects, capital accumulation, and weakening profits. The gap with industry leaders has widened.
In recent years, the failure of foreign investment has been accompanied by the business development of Linglong Tire.
Many of the company’s major domestic and overseas projects have been stalled and terminated, which not only caused a large amount of funds to be deposited, but also exposed the company’s shortcomings in investment research and judgment capabilities and lack of project control. It also received regulatory fines due to information disclosure violations.
In June 2021, Linglong Tire disclosed its foreign investment announcement and planned to build a major project in Tongchuan with an annual output of 15.2 million sets of high-performance radial tires and 500,000 sets of retread tires.
As the core carrier of the company’s national production capacity layout, this project had high hopes for improving the national production capacity network. However, the project progress was not as expected. Major changes had occurred in October 2025. However, the company failed to fulfill its information disclosure obligations in a timely manner and delayed its official disclosure for nearly 7 months, violating the basic requirements for information disclosure of listed companies.
Chairman and then general manager Wang Feng and board secretary Sun Songtao were both given supervisory warnings because they were primarily responsible for the above-mentioned behavior.
As for the reason for the termination of the Tongchuan project, Linglong Tire explained that the early preparations for the project were progressing slowly and the relevant supporting measures failed to be implemented as scheduled, resulting in greater uncertainty in the institutional guarantees and expected benefits of the project implementation. In order to optimize resource allocation, it decided not to proceed after full demonstration and careful judgment.
As of early May 2026, the company has invested a total of approximately 380 million yuan in preliminary planning and preparation for the project, with the funds mainly used for land purchase and preliminary expenses.
Although the company is currently actively communicating with various partners and striving to recover the above-mentioned amounts, it also stated that it “does not rule out the risk of being unable to recover the amount in full.”
Wang Pengfei, a senior capital market researcher, said: “The early-stage supporting implementation progress of large-scale industrial projects should have been fully studied and judged before the investment project was approved. The slow progress of the project until the final termination reflects the problem of Linglong Tire’s early-stage due diligence and the impact on local supporting policies.
, and insufficient assessment of the pace of implementation.
More importantly, the delay in disclosing changes to major investment projects for nearly half a year highlights that the internal control mechanism for information disclosure of listed companies is ineffective, and the right to know of small and medium-sized shareholders is difficult to protect.”
Not only the Tongchuan project, but also Linglong Tire.
The Anhui project that was reviewed and approved at the end of 2022 has also stalled.
Affected by multiple factors, the investment progress and construction cycle of this project cannot be advanced as originally planned. Currently, only the construction of the living area (including dormitory buildings, office buildings, and restaurants) and some production supporting facilities (including warehouses and fire pump rooms) has been completed. The main workshop is still in the planning and design stage, and an amount of approximately 140 million yuan has been invested.
The company stated that it will proceed with construction in a timely manner after careful evaluation based on product market dynamics, actual project needs and the macroeconomic environment.
Overseas major projects also failed.
In April 2025, Linglong Tire announced that it planned to spend 8.71 billion yuan on an overseas investment project in Brazil. It is planned to be constructed in three phases with a construction period of up to 7 years. Construction is expected to start in the third quarter of 2025 and be completed by the end of December 2032. The funding source will be 4.38 billion yuan of self-raised funds and 4.33 billion yuan of bank loans.
At that time, the company regarded the project as a key step in its “7 + 5” global layout. However, the project implementation continued to lag behind, and the original construction plan fell through.
In early May 2026, Linglong Tire stated that it was negotiating with its partners on core terms such as shareholding ratios. The project has not yet entered substantial construction. Due to factors such as investment policies and cooperation conditions, there is a risk that it will not be able to advance as scheduled.
Less than a month later, the company stated that it had failed to reach an agreement with the proposed partner on core terms such as shareholding ratio and cooperation conditions, and the project no longer had the conditions to advance on schedule, and it finally decided to terminate the investment plan.
Wang Pengfei analyzed that “the investment scale of the Brazilian project is nearly 9 billion yuan, and the return cycle is as long as 7 years. The financial pressure and policy risks are extremely high. In addition, the company’s subsequent H-share listing has been terminated, overseas financing channels have been blocked, and the difficulty of capital landing has increased significantly. The project termination has long been foreshadowed. Many large-scale projects have been abandoned halfway, which has not only precipitated more than 5
The initial funding of 100 million yuan is a waste of the company’s strategic layout opportunities, highlighting the blindness behind the radical expansion.”
The reason behind the continuous reduction of projects is the decline in Linglong Tire’s performance.
In 2025, the company’s operating income will be 24.642 billion yuan, a year-on-year increase of 11.72%; attributable net profit will be 1.369 billion yuan, a year-on-year decrease of 21.88%; non-net profit after deduction will be 1.197 billion yuan, a year-on-year decrease of 15%.
In the first quarter of 2026, the company’s performance continued to decline, with revenue of 6.057 billion yuan, a year-on-year increase of 6%, and the growth rate remained low; attributable net profit was 16.89 million yuan, a year-on-year drop of 95%; deducting non-net profit was a loss of 26.9 million yuan, a year-on-year drop of 110%.
As for the reason for the sharp decline in performance, Linglong Tire attributed it to the impact of the external environment.
The company stated that the global trade environment will face severe challenges in 2025. “High tariff barriers” and “escalating green barriers” have created dual pressures, posing systemic challenges to enterprises’ export costs, supply chain management capabilities, and market access. At the same time, the global economy is struggling to move forward under multiple pressures. Geopolitical tensions, increasing trade policy uncertainty, and rising global debt levels have led to significant differentiation in economic growth.
However, compared with the leading companies in the industry, the performance gap between Linglong Tire continues to widen.
In 2025, Zhongce Rubber’s revenue will be 45 billion yuan, a year-on-year increase of 15%, and its net profit attributable to its parent company will be 4.15 billion yuan, a year-on-year increase of 10%; Sailun Tire’s revenue will be 36.8 billion yuan, a year-on-year increase of 16%, and its net profit attributable to its parent company will be 3.5 billion yuan, a year-on-year decrease of 13%.
In the first quarter of 2026, Zhongce Rubber’s revenue was 11.2 billion yuan, a year-on-year increase of 5%, and its net profit attributable to its parent company was 1.22 billion yuan, a year-on-year increase of 6%; Sailun Tire’s revenue was 9.5 billion yuan, a year-on-year increase of 12%, and its net profit attributable to its parent company was 1.06 billion yuan, a year-on-year increase of 2%.
“The performance of leading companies has been steadily rising, while Linglong Tire’s revenue growth rate is lower than that of its peers, profits have declined, and it is close to a loss in the first quarter. Obviously, it cannot be solely attributed to the external environment.” Zhao Yu, a researcher in the automotive industry, said, “The company’s own production capacity layout is chaotic, and problems such as project fund precipitation dragging down earnings are the core internal reasons for lagging performance. In the context of intensified competition in the industry’s stock, internal operating shortcomings have been further amplified.”
From the perspective of industry fundamentals, 2025
In 2018, China’s tire industry as a whole faced the challenge of overcapacity.
For the whole year, China’s pneumatic rubber tire output reached 1.207 billion units, a year-on-year increase of 1.72%; the total automobile tire output was 834 million units, a slight year-on-year decrease of 1.59%; the all-steel radial tire output was 149 million units, a year-on-year increase of 7.19%; the semi-steel radial tire output was 684 million units, a year-on-year increase of 1.33%.
The annual tire export volume was 472 million units, a slight decrease of 0.64% year-on-year.
The global market has also entered a low-growth range. Global Growth Insights data shows that the global tire market will be US$158.27 billion in 2025, a year-on-year increase of 4.1%. It is expected to increase to US$163.97 billion in 2026, with the year-on-year growth rate falling back to 3.6%.
In an environment of low industry growth and overcapacity, higher requirements are placed on corporate cost control, high-end products, and global layout capabilities. Linglong Tire has obviously failed to keep up with the pace of industry upgrading.
As performance stalls, Linglong Tire’s profitability continues to deteriorate, and the company’s gross profit margin has been declining, falling from 22.06% in 2024 to 17.03% in 2025, a drop of more than 5 percentage points.
Until the end of March 2026.
The company’s gross profit margin remained at a low level of 17.07%, and its profit margins were compressed.
Wang Pengfei said: “The tire industry is a highly sensitive industry for raw materials. Fluctuations in raw material prices would have affected gross profit margins, but leading companies have hedged cost pressures through economies of scale, high-end products, and supply chain optimization.”
The reporter also noticed that Linglong Tire’s capital market financing has also encountered setbacks.
In April 2025, the company launched the issuance of H shares and applied for listing on the main board of the Hong Kong Stock Exchange. After nearly a year of preparations, it suddenly announced the termination of the listing plan in early 2026.
The company explained that it comprehensively considered the macroeconomic environment, its actual operating conditions, future development plans and changes in the capital market environment, adhered to the principle of safeguarding the interests of shareholders, and decided to terminate the H-share listing after careful analysis with intermediaries.
Wang Pengfei said, “The termination of the H-share listing has directly interrupted the company’s overseas financing channels, while the company’s large-scale investment projects at home and abroad still require continued capital investment.”
