It is certainly no secret that the world's most populous country is also the biggest manufacturing base on the planet, but it is less known that China is also the top consumer of natural materials such as rubber and copper. The country has been the world's biggest rubber consumer for the past two years, with annual consumption exceeding 3.1 million tons.

The strongest demand for rubber comes from the domestic tyre industry, where consumption steadily increased to approximately 70 per cent of the national total in 2005.

Statistics from the China Petroleum and Chemical Industry Association show domestic tyre production volume hit 224 million units between January and October last year, an increase of 29 per cent from the same period in 2004.

The association also predicts that annual output hit 300 million units last year. This is the best performance the tyre industry has seen over the past ten years, with sales revenues of more than 79 billion yuan (US$9.8 billion).

With this in mind, it should come as no surprise that these developments are attractive to global tyre conglomerates. By coincidence, a number of foreign manufacturers expanded their production capacities last year through investments.

French tyre giant Michelin announced last year it would invest hundreds of millions of dollars to make its Shanghai factory the biggest tyre production base in the world. It also wants to expand its Shenyang joint venture's manufacturing capacity to three times its current size.

US-based Goodyear moved its Asia Pacific headquarters to Shanghai last April to emphasize its strong interest in the Chinese market. Last July it announced an investment of US$18 million in its factory in Dalian, in Northeast China's Liaoning Province, to produce the new RunOnFlat tyre, the only one of its kind in China. The company later decided to invest more than US$120 million in production expansion at the Dalian facility. It expects an annual production capacity of 5.3 million units in 2007.

Japanese manufacturer Bridgestone also increased its investment in its Tianjin factory by one billion yen (US$8.44 million). Annual output will exceed five million units when the project is finished.

Bridgestone also plans to become the biggest factory owner in China by opening new plants in Wuxi, in East China's Jiangsu Province, Shenyang, in Northeast China's Liaoning Province, and Huizhou in South China's Guangdong Province. Frame construction at the Huizhou factory was finished last month for US$330 million.

South Korea's Kumho will boost its annual output to 30 million units through a series of investments in 2006. Once construction is finished in 2007, it could become the biggest tyre production base in China.

Last October, US commercial vehicle tyre producer Copper Tyre & Rubber Co acquired 51 per cent of China's third largest tyre manufacturer, Shandong Chengshan, which had estimated sales of US$500 million in 2005.

Germany's Continent and Italy's Pirelli also launched their first joint venture in China last year.

The world's top ten tyre manufacturers have all established a presence in the domestic market.

Service competition

The world's big tyre producers have also realized the importance of powerful service networks.

"Tyre servicing has become one of the keys to success in the retail tyre market," says Zeng Xinsheng, board chairman and chief president of Goodyear China.

Goodyear's first service centre was launched in China in 1994. It has since set up approximately 100 dealerships and more than 1600 Goodyear franchise retail stores.

Last July the company announced it would build a Goodyear authorized auto service network in China. Three hundred authorized service centres had been established throughout the country by late-2005.

"(The service network) shows we foresaw the market demand, and reflects our long-term determination to develop the China market. The opening of 300 centres in five months indicates our service network can fully cater to the demands of our customers. We will go on to develop and perfect our service network in 2006, to maintain Goodyear's leading position in the Chinese tyre market," says Meng Xianguang, vice sales manager of Goodyear Greater China.

"We plan to open 400 more service centres in 2006," says Daniel Zhang, public relations manager of Goodyear China. This figure has not yet to be formally announced.

However, "(Michelin) has gained a leading position in China's passenger car tyre replacement market, and continues to gain market share in 2006. Our market share in China now stands above 20 per cent," says Emmanuel Ladent, marketing and sales director of the passenger car and light truck tyre replacement market for Michelin China.

Ladent attributes Michelin's competitive edge to its service standards.

"Extensive and professional distribution networks are one of our most successful factors. We now have more than 1,700 certified dealers in China. We were the first tyre maker to train our dealers on the highest levels of service. More than 1,000 people from our dealerships received professional training in our training centre in Beijing last year," he says.

The company began promoting its Tyreplus stores in 2003. Tyreplus is not simply an exclusive tyre store, but a special brand of service retailing. It provides customers a choice of tyre brands and other value-added professional services.

(China Daily 02/27/2006 page7)