Retreading and Chinese tire makers

David Shaw
CEO
TireIndustryResearch.com

David@TireIndustryResearch.com
+44 208 647 1185
+44 797 128 2336
http://TireIndustryResearch.com China and retreading by David Shaw
R E S E A R C H
 Agenda
China Tire Industry Retread management
Main players Adapting to new business environment?
Developments in 2017-2018 Economic modelling and forecasting
Expansion and consolidation Added services
Retreading in China 2018
Not much EC duties on TBR
Retreading boucing back
Retreading in US & Europe 2010-2017 Are these linked
Volumes decreasing My view
Prices falling
Consolidation Tire Industry Research
What we do
Drivers for changes in retread sector
Chinese single use tires ? Q&A
Big names extending offer to smaller fleets?
Super-singles?

http://TireIndustryResearch.com China and retreading by David Shaw

R E S E A R C H

25000
$23788m
$22121m
20000
Haohua Tire ($650.0mn)
15000 Prinx Chengshan ($682.5mn)
Yuelong Rubber ($698.8mn)
Guizhou Tire ($769.3mn)
Doublestar ($770.5mn)
Aeolus ($1008.4mn)
Doublecoin ($1110.3mn)
10000 Sailun Jinyu ($1309.3mn)
Guizhou Tire ($1124.7mn)
Yuelong Rubber ($1542.9mn)
Prinx Chengshan ($1620.4mn)
5000
Doublecoin ($1846.8mn)
Zhongce Rubber ($3201.7mn)
0
Bridgestone China
25000
$24045m
$21564m
20000
15000
Haohua Tire ($650.0mn)
Prinx Chengshan ($682.5mn)
Yuelong Rubber ($698.8mn)
Guizhou Tire ($769.3mn)
Doublestar ($770.5mn)
Aeolus ($1008.4mn)
Doublecoin ($1110.3mn)
10000 Sailun Jinyu ($1309.3mn)
Xingyuan Tire ($1337.0mn)
CST Xiamen ($1368.8mn)
5000
Hengfeng Rubber Plastics ($1397.6mn)
Linglong Tire ($1400.7mn)
Zhongce Rubber ($$3377.1mn)
0
Bridgestone China
http://TireIndustryResearch.com
R E S E A R C H
China’s tire industry
Shandong Zhentai ($195.7mn)
Ningxia Shenzhou Tire ($200mn)
Shandong Ogreen ($214.9mn)
Fengyuan Tire ($228.5mn)
30000 Chaoyang Longmarch ($310.9mn)
Hengyu Technology ($316.2mn)
Fujian Haian Rubber ($256.5mn) Goform Rubber Plastics ($320.7mn)
Tianjin Wanda Tire ($338.0mn)
Nankang (Zhangjiagang Plant) ($354.2mn) Zhongyi Rubber ($399.0mn)
Taishan Tire ($390.7mn)
Shannxi Yanchang ($450.2mn)
$26689m Bayi Rubber ($420.7mn)
$24350m
Shandong Taishan Tire ($454.5mn)
25000 Huasheng Rubber ($431.8mn)
Shandong Hawk International Rubber ($468.8mn)
Shandong Sanli Tire ($470.8mn)
Chaoyang Longmarch ($512.9mn) Yuelong Rubber ($475.2mn)
Bayi Rubber ($514.0mn)
Sentury ($535.1mn)
Huasheng Rubber ($548.2mn) Wanli ($497.8mn)
Zhongyi Rubber ($554.7mn)
Sentury ($511.9mn)
Shandong Yongfeng Tire ($524.9mn)
2016-17 20000
Yinbao Tire ($546.6mn)
Sichuan Haida Rubber ($552.9mn)
Wanda Boto ($596.1mn)
Haohua Tire ($867.3mn)
GST ($596.9mn)
Doublecoin ($997.4mn)
Guizhou Tire ($1049.5mn) Jiangxi Tire ($609.8mn)
Prinx Chengshan ($723.8mn)
15000 Doublestar ($1054.0mn)
Aeolus ($1072.1mn)
Pirelli ($858.7mn)
Triangle ($1192.7mn)
Henan AiTeChi Tire ($152.3mn)
Fujian Haian Rubber ($156.2mn)
Xingyuan Tire ($1246.0mn) 2017-18
Nankang (Zhangjiagang Plant) ($170.0mn)
Sailun Jinyu ($1309.3mn)
10000
Shandong Taishan Tire ($205.7mn)
Shandong Sanli Tire ($238.7mn)
Goform Rubber Plastics ($260.0mn) Hengfeng Rubber Plastics ($1398.3mn)
Xulun Rubber ($269.4mn)
Chaoyang Longmarch ($278.2mn)
Bayi Rubber ($280.8mn) CST Xiamen ($1429.2mn)
Sentury ($307.0mn)
Yinbao Tire ($397.2mn)
Shandong Hawk International Rubber ($455.8mn)
Sailun Jinyu ($1921.3mn)
Zhongyi Rubber ($468.8mn)
Lo
5000
Shandong Ogreen ($477.1mn)
Sichuan Haida Rubber ($489.2mn)
GST ($529.3mn)
Wanli ($548.0mn) Linglong Tire ($2073.7mn)
Zhongce Rubber ($3423.4mn)
2015-16 0
Bridgestone China
China and retreading by David Shaw
2017 2018 revenue 2018 growth YoY op. profit Op margin rev 2017 growth YoY op. profit Op margin tire sales 2016
10 9 Zhongce 3979 18.3% N/A N/A 3364.9 -3.3% N/A N/A 3479.6
9 10 CHENG SHIN 3675 -0.4% N/A N/A 3691.7 1.5% 276.1 7.5% 3636.7
14 14 Kumho 2341 -8.0% -82 -3.5% 2545.3 0.3% -138.8 -5.5% 2537.0
17 16 Linglong 2257 10.8% 517 22.9% 2038.2 28.7% 155.1 7.6% 1583.7
18 17 Sailun 2040 8.0% 404 19.8% 1888.5 12.7% 53.3 2.8% 1675.8
11 18 Giti 2001 -40.4% N/A N/A 3360.1 15.0% 0.0 0.0% 2921.1
19 19 Nokian 1875 5.5% 438 23.3% 1777.0 15.4% 412.9 23.2% 1539.7
22 ? Hengfeng 1374 N/A N/A N/A 1374.5 52.6% N/A N/A 900.9
32 21 Double Coin 1156 16.8% 134 11.6% 990.6 -23.6% 0.0 0.0% 1297.3
25 23 Triangle 1119 -4.5% 239 21.3% 1172.3 16.0% 99.4 8.5% 1010.3
26 ? Gajah Tunggal 1057 N/A N/A N/A 1057.5 10.8% N/A N/A 954.3
24 25 Xingyuan 1054 -13.9% N/A N/A 1224.7 22.7% N/A N/A 998.4
27 29 AEOLUS 927 -12.0% 3 0.3% 1053.8 -4.5% 0.0 0.0% 1103.7
34 ? Haohua Tire  852 N/A N/A N/A 852.5 91.9% N/A N/A 444.2
30 30 Guizhou Tire / China 854 -17.3% 14 1.6% 1031.6 69.5% 0.0 0.0% 608.5
35 32 Prinx Chengshan  776 9.1% 84 10.8% 711.4 8.1% 0.0 0.0% 658.0
29 28 Double Star 558 -5.7% 4 0.7% 591.7 -20.3% 0.0 0.0% 1099.2
37 35 Sentaida / Sentury 503 N/A N/A N/A 503.2 45.4% N/A N/A 346.2

http://TireIndustryResearch.com China and retreading by David Shaw

R E S E A R C H
 China’s tire makers expand
Zhongce: Thailand
Aeolus: China
Linglong: Thailand,
Serbia, China Guizhou: Vietnam
Sailun; Vietnam Prinx Chengshan:
Thailand
Giti: USA, Indonesia
Double Star: Kumho
Double Coin: Thailand
Sentury: Thailand, USA
Triangle: USA, China
http://TireIndustryResearch.com China and retreading by David Shaw
R E S E A R C H
 China’s tire makers consolidate

Dec 2016: ≈600 Dec 2018: ≈450 Dec 2020: ≈150 2030:≈15 firms
≈650 factories ≈500 factories ≈200 factories ≈150 factories
http://TireIndustryResearch.com China and retreading by David Shaw
R E S E A R C H
 Retreading in China
Category PCR & LT TBB/ TBR Total
Vehicle PARC 2017 170mn 47mn 217mn
Avg Tires per Vehicle 4 12
Tires in use (mn) 680 564 1,244
Percentage replaced each year (%) 20% 45%
Percentage retreaded (%) Zero 2%
Annual Waste Tire Amount (mn units) 136 244 380
Waste Tire Output (Tire/Ton) 130 18
Annual Waste Tire Output (mn t) 1.046 13.54 14.59
Source: Ministry of Public Security, as of the end of 2017

http://TireIndustryResearch.com China and retreading by David Shaw

R E S E A R C H
 Retreading in Europe
6mn 5.5mn

5mn
4.1mn
4mn

3mn

2mn

1mn

0mn 2007 2010 2015 2018

http://TireIndustryResearch.com China and retreading by David Shaw

R E S E A R C H
 Retreading in North America
US Truck Tire Replacement Market (in millions)
20mn
19.2
18 18.4
17.3
15mn 15.7 15.6
14.9 14.8 14.5 14.3
New Tires
10mn Retreads

5mn

0
2013 2014 2015 2016 2017
http://TireIndustryResearch.com China and retreading by David Shaw
R E S E A R C H
 More Chinese imports
EU-28 imports of heavy TBR tires (40112090) by origin (units)
800000
2015: 6.11mn 2016: 6.89mn 2017: 7.13mn 2018: 6.34mn
China: 3.84mn China: 4.41mn China: 4.65mn China: 2.21mn
700000 (62.8%) (64.0%) (65.3%) (34.9%)

600000
Rest of World
500000
Russia
Japan
400000 Turkey

300000 Other Asia

200000
Korea
100000
China
0
J FMAMJ J A SOND J FMAMJ J A SOND J FMAMJ J A SOND J FMAMJ J A SOND J
http://TireIndustryResearch.com China and retreading by David Shaw
R E S E A R C H
 Super-Singles (Wide-based tires)
Introduced in 1980s & ‘1990s
Fuel saving
≈5% improvement Adoption rates in US low un-
til 2005 or so
Weight saving
≈360kg less per truck Adoption rates in Europe
higher ≈30% in 1990s
Cost saving
Half the number of tires Growth tends to be gradual

Coincides with reduction in

retreads? Or just one of many
factors

http://TireIndustryResearch.com China and retreading by David Shaw

R E S E A R C H
 Letter from Joe Casebere January 2019:
I just want the retread industry and tire publica-
tions to honestly report the second largest cause
of the diminishing retread pool.
The 2.45 million retread deficit reported by
(TRIB’s) David Stephens at the International Trade
Commission this year is not completely the fault
of the Tier 4, cheap, imported new truck tires.
That is fake news.
http://TireIndustryResearch.com China and retreading by David Shaw
R E S E A R C H
 Letter from Joe Casebere January 2019:

My estimates indicate that more than one-third of

those 2.45 million losses were directly associated
with WBSS.

http://TireIndustryResearch.com China and retreading by David Shaw

R E S E A R C H
 Big-brands are selling into smaller fleets

³³ Economic models improving

³³ Offering added-value (TPMS, Telematics etc)
³³ More info available from aggregated fleet data
³³ Stronger legislation requires better management
³³ Fleets becoming more professional
³³ Customers seeking ‘Green’ credentials
http://TireIndustryResearch.com China and retreading by David Shaw
R E S E A R C H
 Three drivers of change
EU-28 imports of heavy TBR tires (40112090) by origin (units)
800000

Adoption of Big brands sell-

2015: 6.11mn 2016: 6.89mn 2017: 7.13mn 2018: 6.34mn
China: 3.84mn China: 4.41mn China: 4.65mn China: 2.21mn
700000 (62.8%) (64.0%) (65.3%) (34.9%)

600000
Rest of World
Russia

super-singles is ing into smaller

500000 Japan
400000 Turkey

300000 Other Asia

affecting market 200000

100000

0
Korea

China
fleets with
growth J FMAMJ J A SOND J FMAMJ J A SOND J FMAMJ J A SOND J FMAMJ J A SOND J

added-value
Imports of low-
priced TBR tires
driving price
competition
http://TireIndustryResearch.com China and retreading by David Shaw
R E S E A R C H
 Disruption in the business environment
Were the independent retreaders able to cope?
Could they understand these changes?
Could they predict the impact of these drivers?
Did they have the right management vision?
Did they have the right people?
Did they have sufficient resources?
http://TireIndustryResearch.com China and retreading by David Shaw
R E S E A R C H
Whatever does not kill me, makes me stronger
³³ Marangoni now making acquisitions
³³ Mid-sized companies sold to majors
³³ Much better offer, together with added-value
³³ Bringing in more professional managers
³³ Taking broader look at business landscape
³³ Retread volumes picking up

http://TireIndustryResearch.com China and retreading by David Shaw

R E S E A R C H
 Conclusions
³³ Decline in retreads is real
³³ Three main drivers for this change
³³ Imports; Super-singles; Better selling by majors
³³ Fleets getting smarter, want more added-value
³³ Retread management forced to adapt
³³ Those who did not adapt failed
³³ prospects good for those who adapted
http://TireIndustryResearch.com China and retreading by David Shaw
R E S E A R C H
 Tire Industry Research
R E S E A R C H
Compiled by Shaw Information Services trading as
Tire Industry Research
© 2019 Shaw Information Services Ltd
For subscription enquiries
David@TireindustryResearch.com
+44 208 647 1185
www.TireIndustryResearch.com
This newsletter contains information about the tire industry
in China. The information is provided in good faith, but it is
not advice, and should not be treated as such.
Without prejudice to the generality of the foregoing
paragraphs, we do not represent, warrant, undertake or
guarantee that the information in this newsletter is correct,
accurate, complete or non-misleading.
We will not be liable to you in respect of any special, indi-
rect or consequential loss or damage.
Page 1 of 12 — Week ending 26 April 2019
http://TireIndustryResearch.com China and retreading by David Shaw
R E S E A R C H
Return to Contents page
China Tire Intelligence report
Week ending 26 April 2019
Contents Section 4: Data and statistics 9
Chinese coal output grows in March 9
Section 1: Outlook 2
Guilin to build CNY10,000mn auto pole 2 Section 5: Upstream and suppliers 10
China PMI index surges in Feb, March 2 Chemchina releases 2018 annual results 10
YRM launches intelligent twin screw extruder 10
Section 2: Domestic tire makers 3 CNPC Lanzhou workers help improve efficiency 10
Guizhou Tire publishes 2018 results 3 Hainan Rubber releases supervision report 10
Haoyou Tire temporarily closes 4 Shandong inspects Black Cat Jining plant 11
GST Thailand plant receives 11 years’ tax relief 4 Hainan Rubber to hold dividend plan briefing 11
Double Coin tire revenues fell in 2018 4 Tianhua Institute finishes resource integration 11
GST holds annual shareholders’ meeting 4 JN Coke announces annual results 11
Zhongce subsidiary plans TBR expansion 4
Vanlead tire project receives gov’t funding 4 Section 5: Retail and online activities 12
Giti launches TBR line at Shanghai Motor Show 4 Tire King works to grow market after financing 12
Timsun may be shut down by the government 5 Section 6: Environment & recycling 12
Timsun commemorates War of Resistance 5 Tire recycling factory in Taiwan catches fire 12
Timsun and the Government refute rumours 5 Guangrao hits tire companies for violations 12
Linglong adds more stock market investments 5
Land Mining releases 2018 tire business data 5 Section 7: Other activities 12
Guizhou Tire pays missing tariffs 6 Qingdao recommends Double Star tire tech 12
Kaixuan Rubber penalises “chain” dealers 6 Media reports on GST’s Belt and Road effort 12
Aeolus report reveals changes to executive pay 6 Tire companies exhibit at Shanghai Auto Show 12
Guopeng Rubber attempts another auction 6
Tire dealer falls into loss in 2018 6
Triangle published 2018 & 2019 Q1 Results 7
Double Star develops custom tires for Yuchai 8
Tire employees receive Labour Awards 8
Section 3: International tire makers 8
Kumho Nanjing achieves “Green Development” 8
Pharma company reveals Michelin lawsuit 9
Cooper, Chinese partners launch Sunitrac 9
© 2019 Shaw Information Services Ltd R E S E A R C H
 Tire Industry Research
Tire Industry Research
China Tire Monthly review
Keeping the World’s Tire Industry Informed

R E S E A R C H
Month ending 29 April 2019
Triangle, Double Coin, Double Star, Sailun, Aeolus, Guizhou, Giti have all 48 in January, but recovered strongly in February and March to almost 51.
China’s tire industry in May This suggests that purchasing managers are getting more optimistic about
reported single-digit declines in revenue, due largely to falling tire prices.

Insiders’
It’s results season in China. One of the challenges of understanding the tire a positive resolution to the US-China trade dispute.
However, profits are largely up over a year ago. Aeolus, Guizhou returned
industry in China is that, until a few of years ago, all the tire makers were
to the black on an operating basis, while most of the others reported
either privately-owned or government-owned, so there was relatively little Factory closures and consolidation
improved profits. Double Star remains a loss-maker.
public information on the companies. Meanwhile, there is a certain amount of restructuring going on, in the light
In an interesting announcement, Aeolus revealed the compensation of
Over the last five years or so, a series of tire makers have issued shares of duties being imposed on China-made tires by the United States and by
its top managers - Chairman, Wang Feng received a relatively modest

guide to the
on public exchanges, meaning that they are forced to report some official Europe.
CNY1.6mn in 2018.
numbers, and cannot simply make them up, as Triangle did for years. Kenda, Federal and Cheng Shin are closing old factories in China and
The two exceptions are Linglong and Prinx Chengshan. Linglong reported a
The top tire makers to report their information publicly include seeking to expand or build in SouthEast Asia - notably Vietnam.
huge 33% increase in revenues and a 10% increase in operating profit.
• Linglong We continue to report almost weekly on more factory closures, bankrupt-
• Triangle Prinx reported a relatively modest 10% increase in revenues, but profits
cies and loss of capital funding.
• Guizhou jumped by almost three times.

tire industry
Amid all this disruption, a number of larger chains are emerging. Both
• Double Star In both cases, we put this down to good management.
Sky Tire and Shandong Linghang Tire are starting to emerge as powerful
• Sailun Just as an aside, we’ve been looking through the numbers and the only forces, as they acquire assets of bankrupt companies.
• Aeolus company to report specific raw materials costs is Triangle, who said that
• Prinx Chengshan SkyTire has struck deals with ChemChina to buy Yellow Sea and Beili
the total raw materials bill is 62% of corporate revenues. This compares
• GST (General Science and Technology) with around 22% for Michelin and 29% for other premium tire makers, but ELT tire activities coming to the fore

• Giti (Jiatong)
• Huayi and its subsidiary Double Coin
In addition a number have raised money through the third boards such as
NEEQ.
This means we now have some reasonably reliable data to offer on the
current status of the Chinese tire industry.
Having said that, these publicly-quoted companies tend to be biggest and
the best-managed. Thus, they are better placed than most to weather the
storms currently affecting China’s tire industry.
The smaller companies are still suffering, so it is not always appropriate
to extrapolate data from these top companies to the rest of China’s tire
industry.
Having said that, our analysis of the published results so far is that even
these top companies –with a couple of exceptions – are suffering.
Compiled by Shaw Information Services trading as
Tire Industry Research
© 2017 Shaw Information Services Ltd
For subscription enquiries
David@TireindustryResearch.com
+44 208 647 1185
Month ending 29 April 2019
around 60% for Indian tire makers.
Among upstream suppliers, the fortunes are mixed. A few, such as carbon
black and silica supplier, JN Coke have reported big jumps in revenue and
profits. Most others have suffered from the consolidation among their cus-
tomers, with bad debts incurred from tire makers who have closed before
paying for their materials or equipment being a common cause of financial
problems among the suppliers.
Industry is suffering
In the first two months, total tire production in China was down by 7% YoY,
showing continued weakness.
CRIA predicted tire production volumes for 2019: down 2% overall, with
TBR down by 12% and PCR up by 1%.
We think this is over-pessimistic on the truck side, but optimistic in the car
segment. The truck tire business seems to be recovering in Q1, with logis-
tics firms returning to work after the Spring break, and the government
has announced a number of huge infrastructure projects, which will lead
to increased demand for earthmover and heavy transportation of earth and
other materials.
Meanwhile car sales in China in the first quarter are just as dismal as in
the last quarter of 2018, with Q1 car sales down 11% on last year.
We also note that the Caixin PMI index was at the historically-low level of
2018
We’ve been getting a lot of questions recently about the end-of-life tire
(ELT) situation in China. We published a significant report on that during
April, and have looked at how the business is changing – and it is chang-
ing very fast, as China finally wakes up to the fact that ELT is a significant
issue.
The ELT industry is restructuring even more rapidly than the tire makers.
However, there is no reliable infrastructure to collect the ELTs that are
dispersed across the country.
This guide tells you everything you need to
Historically, this task was carried out by families who – close to the pov- know about the global tire industry. From pricing
erty line – would run around an area with a motorbike and a scaffolding
pole, collecting tires, and carry them on the pole back to a small-scale to trade barriers; from technology to brand
base.
The vast majority of these operations have been closed in the environ- recognition; from country and regional data to
mental crack-down. While there are technologies that can dispose of tires,
China is still struggling with the best way to dispose of tires. Unfortunately, strategy; from management to sustainability; from
without the collection infrastructure, many of the projects being set up in
China at present will struggle. corporate rankings to raw materials; from global
Overseas ground-breaking investments to disruptive innovations
Both Linglong and Prinx Chengshan held ground-breaking ceremonies for
their plants, respectively in Serbia and Thailand in the last month. These
have been well covered in the international media.
David Shaw
© 2017 Shaw Information Services Ltd R E S E A R C H

http://TireIndustryResearch.com China and retreading by David Shaw

R E S E A R C H
 Thank you for your attention
David Shaw
CEO, TireIndustryResearch.com
David@TireIndustryResearch.com
+44 208 647 1185
+44 797 128 2336

R E S E A R C H

http://TireIndustryResearch.com China and retreading by David Shaw

R E S E A R C H