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The world's largest tire companies will begin to implement a new Chinese strategy. The American Goodyear Tire Company will begin to formally manufacture and sell the run-flat tires that can still run normally after the flat tires. The French Michelin has built a sales network combining online stores and physical stores. Although China's new car market has become more and more obvious signs of the top, but the car ownership will continue to grow steadily in the future. The main battlefield of tires is also expected to shift from new car tires to replacement tires, and major tire companies are competing to increase the brand's strength, the added value of products and services to compete for consumers.
Tire is about life
“The tires are life-threatening. Even if the price is a little higher, they will choose products with good performance and strong brand strength.†A 40-year-old male customer evaluated the tires of each brand in a tire store in Dalian City, Liaoning Province.
Tire companies are taking action in Dalian to keenly capture consumer demand. Goodyear has begun large-scale expansion of the Dalian plant. The investment amount is about 135 million US dollars. Goodyear has not announced the production capacity of the plant. It is expected that after the completion of the expansion in 2017, it will increase production of 2 million tires per year. Of these, 50,000 are "run-flat tires" that are still safe to run in the event of a puncture.
Gas-free tires have been popular in developed countries since about 10 years ago, but they are still in the niche market category because prices are about 20% higher than ordinary tires. However, a tire industry official said: "Consumer safety awareness continues to increase, and the demand for safety tyres is expected to increase substantially."
In addition, Goodyear also targets high value-added products. In March, China opened its first R&D center. The Chinese market is vast and Goodyear will launch products that meet local road conditions and climate in all regions. Goodyear’s CEO Richard Kramer stressed: “We want to provide consumers with more valuable products.â€
Structural changes in the tire market
The reason why tire companies upgrade their Chinese strategy is that structural changes are taking place in the Chinese tire market.
The first is the slowdown in the new car market. China surpassed the United States in 2009 to become the world's largest auto market, and its market scale has grown to 4.6 times in the last 10 years. In 2014, new vehicle sales increased by 7% year-on-year to 23.49 million vehicles. However, in April 2015, it turned negative for two and a half years. The slowdown in the new car market directly hit the tire industry. According to Tireworld.com, the total sales of 46 large tire companies including foreign investment in 2014 decreased by 2%. This is due to the increase in corporate inventories and the emergence of price reduction competition.
Another point is the increase in car ownership. According to statistics from the American survey company IHS Automotive, China’s car ownership is 1.6 trillion vehicles, and it is expected that in the next five years, 2.5 trillion vehicles that surpass the United States will rank first in the world.
According to a survey conducted by the China Chamber of Commerce, China's tire production reached more than 1.1 billion in 2014. New car tires and replacement tires each accounted for half, and it is expected that the share of replacement tires will increase to 80% in the future.
Consumers can't choose new car tires. In contrast, the brand strength and performance of replacement tires are crucial. The competition that once appeared in developed countries will repeat itself in the Chinese market.
Tires are also sold online
It is not only products that are pursuing added value. Michelin has opened an official flagship store on Tmall. Consumers can select the type and size of tyres they need on the Internet. After completing the payment online, it can be picked up in about 600 stores across the country. The store will provide consumers with free replacement tires. The price can be 20% lower than usual.
Michelin's online flagship store will comprehensively expand its after-sales service, including vehicle maintenance and oil replacement, to expand its customer base by increasing convenience.
Japanese company Bridgestone tires are not limited to the existing sales network and are promoting the "Wings of the Car" store. We plan to increase the current 360 stores to 500 as soon as possible, focusing on brand strength and meticulous marketing activities, thereby highlighting the differences from competing products.
According to Yoshihiko Yoshihide, chairman and general manager of Bridgestone China, “The road conditions in various regions of China are very different. We will develop different marketing strategies for each region to obtain customer needs.â€
Although there is currently no detailed statistical data on the Chinese tire market, according to industry speculation, South Korean companies such as Hankook Tire and Kumho Tire, which occupy low prices as weapons in the field of new vehicle tires, occupy 30%-40% of the market. In terms of share, Chinese manufacturers account for about 10%. The remaining 50% of the market is divided by Michelin, Bridgestone and Goodyear.
As China's new car market matures and competition becomes fiercer, tire manufacturers that can decisively carry out structural reforms are expected to further expand their revenues.