Rubber Industry Faces Many Challenges in 2012

In 2012, the global economic uncertainty increased, the European debt crisis continued to ferment, the US economic recovery was weak, the development of emerging economies slowed down, China's economic growth rate will further fall, investment will be reduced, foreign trade will be blocked, domestic demand will be weak and will give China's rubber industry Development brings many challenges. On March 20-21, at the “2012 China Rubber Annual Conference” sponsored by the China Rubber Industry Association, Fan Yingde, head of the China National Rubber Association, gave a report on “Opportunities, Challenges and Strategies for the Development of the Chinese Rubber Industry under the New Situation”. Fan Rende said that in 2012, China's rubber industry is facing seven major challenges, we must face difficulties, pioneering and innovative, and unswervingly implement the strategy of a powerful industrial rubber country.

Fan Rende said that in 2012 the country will implement a proactive fiscal policy and a prudent monetary policy, accelerate the transformation of economic development patterns and economic restructuring, focus on expanding domestic demand, strengthening independent innovation and energy-saving emission reduction, deepening reform and opening up, and ensuring and improving people’s livelihood To maintain stable and rapid economic development and the general stability of the general price level, and maintain social harmony and stability. However, domestic economic restructuring cannot be achieved in a short time. Since the reform and opening up, China’s rapid economic development has been driven by investment, export, and consumption of troika. Now that this road is impassable, there are two paths to choose from: First, adjust the domestic demand structure and cultivate a dynamic domestic The second is to adjust the industrial structure, promote the transformation of the industry from low-end to high-end, and shift from external demand to domestic demand-oriented industrial structure. Both of these approaches face greater difficulties because it takes time to cultivate a domestic demand-oriented consumer group, especially the middle-income group, and adjust the industrial structure. Therefore, the development of China's rubber industry will also face many challenges.

At present, the main challenges facing the rubber industry in China are:

1 Tire and other products with structural deficiencies and outstanding challenges

During the “Eleventh Five-Year Plan” period, China’s economy developed rapidly, both domestic and foreign investment were optimistic about the Chinese market, and accelerated the dramatic expansion of the production capacity of tires and other products in China. Only in 2010, more than 100 million new tires were produced, of which some were homogenous. Growth in production capacity. At the same time, the concentration of domestic industries is low. Under the current situation of declining exports and weak domestic market, domestic and foreign market competition is further aggravated, which is detrimental to brand building and fosters a healthy market order, leading to a decline in corporate profits.

2 The Challenge of Multi-factor Cost Increase

At present, the main factors affecting the increase in the cost of China's rubber industry are the large fluctuations in rubber prices, the investment in environmental protection and energy-saving emission reductions, labor costs, and logistics costs. These factors have led to a substantial reduction in corporate profits.

3 The lack of technical talent and the lack of innovative ability

The quality of economic growth in developed countries such as the United States is very high, and the contribution rate of scientific and technological progress to economic growth is as high as 80%. The economic growth in China is mainly driven by investment and exports, and the contribution rate of science and technology is relatively low, about 41%, while the contribution of China's rubber industry to the growth of science and technology is far below this level. According to the National Medium- and Long-Term Scientific and Technological Development Plan Outline for 2006-2020, the contribution rate of China's scientific and technological progress in 2020 will reach 60%. Under the current fierce market competition conditions, the lack of enterprise technical talents, lack of innovation capability, and low investment in science and technology have delayed the completion of tire testing grounds that are crucial for the development of green tires, seriously affecting new product development and technological progress of rubber enterprises. .

The advancement of tire technology has become the driving force for development and competition. Recently, according to the "European Rubber Journal" reports, the research funding of major companies in the world generally accounts for 3% to 6% of their sales; in 2010, the world's major tire manufacturing companies spent approximately US$4.97 billion on scientific research. Among them, mainland, Bridgestone, Michelin, Sumitomo, Pirelli, and Hankook’s R&D expenses accounted for more than 3% of company sales, mainland China’s R&D expenditure was the largest, reaching 5.6%, and Michelin and Bridgestone’s 3%. The R&D expenditures of Continental, Bridgestone, Michelin, Sumitomo, Pirelli, Hankook and Yokohama were US$1,921.1 million, US$968.9 million, US$721.9 million, US$212.9 million, US$198.3 million, US$175.2 million and US$147.1 million, respectively. .

It is a long-term task to increase investment in scientific research and continuously increase the contribution rate of scientific and technological progress in the growth of China's rubber industry.

4 The challenge of weak brand influence

For more than 30 years of reform and opening up, China has become one of the fastest growing economies in the world, and China’s GDP has risen to second place in the world. In this process, Chinese brands have experienced a large number of well-known brands from system construction to brand incubation and promotion to initial prosperity. However, looking at the overall development situation, Chinese brands are not mature enough to develop, and they still play the role of “world processing factory” in the world economy. Throughout the world, "Made in China" products are everywhere, but it is difficult to find the shadow of "Chinese brands." China is a big manufacturing country, but it is by no means a brand power.

China's export of tires and other rubber products accounted for about 40% of total output. Except for some key enterprises exporting through their own brands, a considerable number of companies export OEM products at a low price. In the domestic market, domestic product prices are much lower than internationally renowned brands. At home and abroad, our rubber products are facing competition from foreign brands.

5 The Challenge of Tire Labeling

More and more countries are brewing or have implemented tire label regulations. Labeling tires with labels similar to the energy efficiency of refrigerators will help improve tire performance by grading indicators such as fuel consumption and slippery road surface grip, which will lead to energy conservation and environmental protection. This move will be applied in more and more countries. From November 1 this year, the European Union and South Korea will implement mandatory tire label regulations, and the global market share of green tires will increase by more than 15%.

The EU Tire Labeling Law stipulates that car tyres, light truck tyres, truck tyres and bus tyres sold in the European Union must be labelled to indicate the tyre's fuel efficiency, rolling noise and wet grip level. The goal is to reach European energy sources by 2020. Reduced consumption by 20%. According to fuel consumption and slippery road surface grip, the European Union divides tires into seven grades of A to G. A represents the highest performance and G represents the worst performance. In addition, the EU has also classified the noise emission of tires. Tire and automobile manufacturers exporting products to the EU must comply with the EU's new tire labeling regulations.

Driven by this move by the European Union, many countries have introduced their own label regulations. For example, 28% of Korean tires are exported to the European Union, so the country has introduced a voluntary tire labeling system, which will become mandatory from November 2012. In this label, the tires are classified into five levels of 1 to 5 in terms of rolling resistance and wet grip.

In addition, Japan has implemented a voluntary tire labeling system since 2010, which mainly indicates the rolling resistance of tires and the level of grip on wet surfaces. The United States passed legislation containing tire labeling regulations as early as six years ago, and current industry groups and regulators are making final changes to the regulations. It is highly likely that tires will be graded based on their fuel efficiency, traction performance, and tread wear. Brazil is also currently developing similar tire labeling regulations.

6 The Challenge of Increasing Trade Friction

This year is the year for the election of the United States. Due to political considerations, the U.S. trade attitude toward China tends to be tough and put into action. Moreover, the US trade with China has embarked on a tough road and it is estimated that it will continue along this path. According to a news release issued by the US Wall Street Journal on January 20, the United States’ China tire ** case that began in 2009 will be submitted for consideration shortly thereafter and may be postponed. In addition, U.S. President Barack Obama mentioned China five times in his third State of the Union address on the evening of January 24, and his attitude toward China’s trade has become increasingly tough. Which is worth the attention of the tire industry is that in order to prove the effectiveness of the US trade remedy against China, Obama also specifically mentioned the tire ** case. In addition, the United States has also set up a new trade law enforcement department, and it is expected that the future trade friction situation will escalate and it may be once again tainted with Chinese tires.

In addition, the Ministry of Commerce issued early warning information on its website on February 2. On January 31, members of the U.S. manufacturing industry, U.S. Senator Brown, and other lawmakers held a press conference, accusing China of subsidizing the auto industry and damaging U.S. industries. The government took measures to restrict imports of Chinese auto parts and launched more anti-dumping and countervailing investigations on engines, automotive electronics, tires and other related products. The Ministry of Commerce invited the relevant commercial associations and companies to pay close attention and prepare for the relevant preparations. According to statistics from the Automobile Industry Association, China’s auto parts exports to the United States last year were US$ 12.8 billion, of which sales of tire components were US$ 2.4 billion, which exceeded automotive electronics and engines.

On March 13, US President Barack Obama signed the Tariff Law Amending Act, authorizing the U.S. government to impose countervailing duties on non-market economy countries including China. The passage of the bill has enabled the United States to have a legal basis for the "double reaction" of Chinese products. Moreover, the effective date of the bill dates back to November 20, 2006, which has enabled the US Department of Commerce to legalize 24 countervailing sanctions against Chinese products. This will bring great hidden danger to China's tire exports. According to news from relevant parties, the US Steel Workers Union USW is very likely to launch a "double reaction" against Chinese tires.

In addition, the EU’s increasingly stringent trade barriers and the protection of trade in emerging economies have further aggravated the pressure on China’s tires and other products. China’s rubber industry is facing an unprecedented challenge of increasing trade friction.

7 Step by step regulation challenges in the automotive tire market

On February 3, the Legal Affairs Office of the State Council issued the “Consultation Draft for the Management of Defective Automobile Products Recall”, which clearly stipulates: If the tires of the accompanying equipment are flawed when the automobile products leave the factory, the manufacturer of the automobile products shall be responsible for the recall; If the tires of the equipment are defective, they are recalled by the tire manufacturer. The introduction of the drafts filled the gaps in domestic car recalls, upgraded the recall management regulations from departmental regulations into laws and regulations, and also incorporated tires into the recall regulations. The implementation of the regulations is both a challenge and an opportunity for the tire industry, and will surely make the tire market more standardized. Tire companies will pay more attention to product quality and accelerate the survival of the fittest.