High inventory and low sales will be the mainstream of the automotive tire market in 2013

Since last year, the trend of the tire industry has continued to be sluggish, and companies’ willingness to invest has been weak. At present, tire companies are still in the de-stocking stage, and the growth momentum is expected to slow down.

According to the "China's Tire Manufacturing Industry Depth Research Report 2011-2015" published by China Research Institute, it shows that in recent years, due to the economic downturn, the Chinese auto market demand has contracted, directly affecting the prosperity of the tire industry; coupled with the deterioration of export conditions, tires The investment willingness of enterprises is generally not high. It is expected that in the next few years, the tire market in China will still maintain the oversupply situation. Each tire company will face a reshuffle of the survival of the fittest.

From January to February this year, driven by the increase in domestic demand, the tire industry produced 13.83 million tires, an increase of 13.8% year-on-year. Although the start was good, the overall momentum was not strong from the perspective of the investment of tire companies. In the first two months of this year, the tire industry plans to invest 68.7 billion yuan, a year-on-year decrease of 1.1%; and the completed investment is 4.694 billion yuan, an increase of only 2.7% year-on-year.

Last year due to bleak sales of tires, the prices continued to drop, and all dealers accumulated a lot of inventory. At present, tire companies are basically in the state of digesting the backlog of inventory. Some of them not only store tires in the warehouse to the prescribed height limit, but also pile tires on the road. Because of the large amount of liquidity required for inventory backlog, many companies feel the pressure of cash flow difficulties. The increase in debt has also lowered the safety factor of funds and increased the risk of capital chain fracture.

From the perspective of the entire industry, China’s tire industry has a structural overcapacity and the homogenization of products is serious. The competition among tire manufacturers has become increasingly fierce. In this context, domestic and foreign brands of tires continue to increase promotional efforts, such as taking quarterly awards, full-year contract cash prizes, designated promotional specifications, one-stop pricing, buy gifts and other measures, crazy to snatch market share. In the fierce competition, prices keep falling, and profit margins are squeezed.

In addition to fierce market competition, tire companies must also follow the trend of reform marketing model. Direct sales of products, online sales, etc. force domestic manufacturers and distributors to make timely transitions and improve rapid response capabilities. Some companies and distributors competed for space for survival, spending huge sums to build direct-operated stores, and adopting measures such as expanding storage capacity, tire distribution, and after-sales services, so that they could directly take delivery from the warehouse and deliver the products quickly to the end users.

Analysts from China Research Institute's Puhua Automotive Component Research report pointed out that the tire industry is affected by the economic weakness, and the market demand growth is weak; the prevalence of international trade protection and technical barriers also brings pressure on exports. It is expected that high inventory and low sales will remain the mainstream of the tire market in the near future.