The tire industry consolidation in 2016 is imminent. On January 12, 2016, the press conference on the economic operation situation of China's oil and chemical industry in 2015 revealed that the problem of overcapacity in tires and other industries was very serious; the imbalance between supply and demand in the market caused prices to fall again and again; long-term depressed prices made the company unprofitable Can be. On January 24, Shandong, which occupied half of China's tire production capacity, took the lead to release signals that drastically removed the industry’s capacity. Guo Shuqing, governor of Shandong Province, emphasized the need to resolutely promote the excess capacity of the seven high-pollution, high-energy-consuming industries such as tires and steel. Blind expansion leads to low capacity utilization "Overcapacity in the domestic tire industry is essentially a structural excess, that is, a serious excess of post-production capacity," said Deng Yaxi, president of the China Rubber Industry Association. Domestic tire production capacity reached saturation in 2010, with a total output of 443 million. Among them, the radial tire output was 375 million. In 2012, the domestic tire industry began to experience overcapacity. In 2013, the total domestic tire production exceeded 500 million, of which, the radial tire output exceeded 435 million. Today, there are more than 300 large and medium-sized enterprises in the domestic tire industry. There are more unregulated and unregistered small enterprises, and the production capacity is far greater than the market demand. The so-called backward production capacity is the production capacity of tire products with low technical performance, low added value, and homogenization. On January 26, Zhang Hongmin, chairman of the Shandong Rubber Industry Association, said in an interview: “The overcapacity in the tire industry is the excess capacity of low-performance tires.†At present, 65% of China-made passenger car radial tires and light truck radial tires are low-end products; the annual production capacity of all-steel radial truck tires is about 130 million, and the annual market demand is only 80 million. On January 27, 2016, Qian Ruiqi, chief engineer of the Double Qiang Group Co., Ltd., and director of the Tire Research Institute, said in an interview: “The production capacity of various types of automotive tires in China is very large. At present, these capacities are far from complete. freed." The excess capacity of tires has led to a continuous decrease in the operating rate of the tire industry. In 2012, the operating rate of large enterprises in the domestic tire industry was about 95%, the operating rate of medium-sized enterprises was about 80%, and the operating rate of small-sized enterprises was about 60%. In 2015, the average operating rate of the domestic tire industry has dropped below 70%. As the largest province in China's tire industry, the contradiction between excess capacity in Shandong tires is particularly prominent. At present, the annual output of the tire industry in Shandong Province accounts for about 45% of the total annual tire production in the country. However, as early as the end of 2012, the capacity utilization rate of the tire industry in Shandong Province was only 55%. Zhang Hongmin told the reporter: “In 2015, the operating rate of the tire industry in Shandong Province was lower than in 2014. In 2016, the operating rate of the tire industry in Shandong Province will be lower than that in 2015. Shandong tire production capacity should be reduced by at least 20%.†Overcapacity has led to an increasingly fierce price war. The average profit margin of the domestic tire industry once dropped to about 4%, which is far lower than the 15% profit rate of famous multinational tire brands. Folding in overseas markets increases pressure on overcapacity In 2009, the tire market was hot and many companies made a lot of money. Driven by profits, many tire companies are free to invest in expanding their production scale. In particular, the all-steel radial tire industry and the semi-steel radial tire industry have witnessed an upsurge in investment in huge capacity. Some local governments have been eager for quick success and profit, ignoring the actual market capacity for pursuing political achievements, striving to promote the expansion of the local tire industry, and even reducing the market access conditions for tires, fuelling the investment in low-end tire production capacity. In 2013, domestic tire investment was mainly concentrated in the Shandong region centered on Guangrao. For example, a tire company in Shandong Guangrao added 1,080,000 new steel tires, and is also building a capacity of 5 million semi-steel passenger car tires; another tire company in Shandong Guangrao has decided to add 2.5 million full-steel heavy-duty tires. And 6 million semi-steel passenger car tires production capacity. Many tire companies have also taken aim at overseas markets, and China has rapidly developed into the world's largest tire producer and exporter. In 2014, the production of Chinese radial tire tires reached 630 million, an increase of 8% year-on-year; it accounted for more than 30% of the world's total production of tire tires for the world's meridian tires. Of these, 40% are exported. The United States has a 30% share of the overseas market for Chinese tires and is the largest overseas market for Chinese tires. Domestic passenger car and light truck tire manufacturers are very dependent on the US market. On August 10, 2015, the U.S. Department of Commerce issued a "double anti-dumping" (anti-dumping and countervailing) tax on Chinese passenger and light truck tires in the "Federal Gazette" and came into effect. Qian Ruiji said: "The United States' "double-reverse" restrictions on China's passenger and light truck tire exports are very severe." In the first four months of 2015, influenced by the US "double reverse" investigation on Chinese tires, China exported 2126 to the United States. Ten thousand tires dropped 29.7% year-on-year. There are more than 200 tire companies involved, and the amount involved is about 3.37 billion U.S. dollars. Up to 1 million industrial workers in the upstream and downstream industries are threatened by falling income or unemployment. According to statistics from China Rubber Industry Association, in 2015, the operating rate of China-related tire companies suddenly dropped from 90% to about 55%. The “double reverse†in the United States has led to a sharp decline in the number of Chinese tires exported to the United States, further accentuating the crisis in China’s tire overcapacity. Subsequently, the European Union rejected the certification of tires that failed to meet the second phase of the Labelling Act. This means that from November 2018, the EU will ban the sale of "non-compliance" tires. Chinese tire companies have moved to the Middle East market. On October 22, 2015, the GSO (Gulf Standards Organization) issued a notice that starting from January 1, 2016, the seven countries in the Gulf began to implement the "Tire Labeling Act." This undoubtedly increased the difficulty of selling Chinese tires to the Middle East. Qian Ruiqi pointed out in particular: “The proportion of foreign brand cars in China’s entire vehicle industry is very large. In Chinese-foreign joint venture vehicle companies, foreign parties, especially Japan and South Korea, insist on using foreign-brand tires and do not consider using Chinese tires to protect their original. There is a tire supplier. This is one of the reasons for the excess capacity of Chinese tires." A large number of tires are not sold, and many tire companies have to reduce production or stop production. Some tire companies that rely on the export market have even faced a crisis of closure. Tire industry reorganization and merger is not irresistible In 2015, the domestic tire industry's economic performance indicators have been reduced, especially tire production has continued to grow negatively. This is the first time in 30 years. Under the current cold economy, the price war is still fought in the middle and low-end homogenization market and it is doomed to be unsustainable. In 2015, the Interim Measures for the Administration of Announcement of Tire Manufacturers, the General Technical Specifications for Composite Rubber, and the “Thirteenth Five-Year Plan for the Development of the Tire Industry†outline were successively implemented, and they continued to pressurize tire companies that were already disastrous. However, the misfortunes are not monopolized. The US Department of Commerce’s “anti-dumping, countervailing†taxation rules for Chinese passenger car and light truck tires formally came into effect, which has added to the difficulties of the Chinese tire industry. Internal and external troubles and pressure are high. The domestic tire industry is suffering from purgatory-like torment, and restructuring and mergers and acquisitions are unacceptable. On February 9, 2015, Shandong Deruibao Tire Co., Ltd. with a debt of 4.7 billion yuan crashed. This incident led to endless speculations about the prospects of the Shandong tire industry, which has a large number of companies and a variety of companies. At the end of the same year, Shandong Watson Rubber Co., Ltd., whose capital chain was broken and unable to support, was acquired by Hengfeng Rubber & Plastic Co., Ltd. In fact, the integration of the domestic tire industry has been surging. Industry insiders believe that restructuring and mergers and acquisitions are the successful experience of world-class tire companies becoming bigger and stronger. Both Bridgestone of Japan and Michelin of France have dozens of tire factories, a substantial part of which are restructured and merged. For example, after Bridgestone reorganized and merged Firestone, it quickly became the new leader in the world tire industry. However, China's tire industry restructuring and mergers and acquisitions has just started and lacks experience. Therefore, there are many cases of tire industry restructuring and mergers, but the success rate is below 40%. Relevant experts and strokes: "Zhihe friends, is a magic weapon to reorganize mergers and acquisitions." The wheels of history are rolling forward and we are looking forward to experiencing the Chinese tire industry after the market rushing to sand. 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