On the evening of June 17, Sailun Tire issued a major investment announcement. The company plans to increase its investment by US$1.141 billion to build the “Egyptian Tire Production Capacity Enhancement Project.”
This is the company’s third large-scale investment in the Egyptian project in less than a year. Once completed, it will significantly increase the overall production capacity of the company’s Egypt project, better match and meet the needs of customers in the global market, and enhance the company’s comprehensive strength and global core competitiveness.
Continue to increase investment in Egypt and upgrade production capacity by leaps and bounds
In just one year, Sailun Tire has continued to increase investment in the Egyptian track. This US$1.141 billion expansion project plans to produce 27 million semi-steel radial tires, 1.65 million all-steel radial tires and 20,000 tons of off-highway tires annually.
After the project is fully completed and put into operation, the company’s Egypt project will form a complete production capacity matrix with an annual output of 36 million semi-steel radial tires, 3.3 million all-steel radial tires, and 20,000 tons of off-highway tires. The production capacity of the North African manufacturing hub will achieve an order of magnitude jump.
Looking back at the pace of investment, the company just announced the second round of investment plans for the Egyptian project in April this year, and the project construction is currently progressing smoothly.
As the first domestic tire company to build factories overseas, Sailun Tire has rich experience in overseas project construction and operation management.
According to the plan, the annual output of 9 million semi-steel tires in the Egyptian project is expected to be completed in 2027, and the remaining production capacity is expected to be fully implemented in 2028.
The company stated that the estimated investment payback period (after income tax) of this project is only 5.67 years, which is financially acceptable.
The Egyptian project has obvious advantages. Relying on the core location of the Suez Canal, a global shipping artery, and Egypt’s participation in multiple national and regional trade agreements, it has sufficient location and tariff policy dividends.
In addition, the increased production of the Egyptian project will form regional complementarities with the company’s overseas factories in Vietnam, Cambodia, Mexico, Indonesia and other countries, providing better economies of scale.
The company estimates that under the current market demand, the fixed cost per unit product of this scale of production capacity will be reduced, raw material procurement can form a batch advantage, and logistics, public works and other supporting costs will be competitive after evenly amortizing, which can further strengthen the global price competitiveness of the company’s overseas products.
The gap between supply and demand persists, and European orders are full
The continuous rounds of capital increases and production expansion are essentially Sailun Tire’s accurate prediction of global tire market demand. The company stated that the Egyptian project is mainly focused on Egypt, Europe, North America and other markets.
From the perspective of regional market fundamentals, Egypt is the third largest automobile market in Africa. The local car ownership has been steadily rising, and tire consumption demand has grown in the long term. However, local tire manufacturing capacity is seriously insufficient, and market supply is highly dependent on imports. The supply and demand gap for high-end commercial vehicles and high-quality passenger car tires is difficult to fill in the short term, providing a stable local base for the project to digest production capacity.
Looking around the world, Europe and North America are the core areas of global tire consumption. The huge stock of cars has generated sustained and stable replacement demand, and there is broad room for growth in overseas markets.
More importantly, in the context of the EU’s anti-dumping policy against Chinese tires, direct exports of domestic products face high tariffs, and Egypt is expected to become a key fulcrum for undertaking European spillover orders.
The company mentioned many times in investor exchanges that the production capacity of the company’s overseas factories is steadily increasing, and there are sufficient orders in Europe.
Profit prospects are promising, and the globalization strategy continues to upgrade
Announcement calculation data shows that after the completion of the Egyptian production capacity improvement project, it is expected to increase the company’s average annual operating income of US$1.161 billion and average annual net profit of US$170 million.
The long-term profit potential is clear and considerable, and the investment value is outstanding.
With the launch of new production capacity in Egypt, Sailun Tire will build a complete global production capacity layout covering six major regions: China, Vietnam, Cambodia, Mexico, Indonesia and Egypt.
Diversified overseas manufacturing bases can effectively disperse policy and trade risks in a single region, significantly improve the resilience of enterprises in global operations, hedge against the operational impact caused by various international trade barriers, and continue to consolidate global competitive advantages.
