Under the pressure of environmental protection, tire companies raised their prices again and hundreds of companies no longer exist.

Since 2016, tire prices seem to have become a common topic. After undergoing special inspections by the Ministry of Environmental Protection throughout the country last year, tires and tires and raw material companies that are the “key target” are faced with changes in the industrial structure. Some tire manufacturers have privately told the "Securities Daily" reporter, "If in the past there was a large number of domestic tire companies that had to close down, there may be no one. But after 2017, everyone believed."

According to incomplete statistics by Securities Daily, in December last year, 49 tire companies implemented price increases; only on the New Year's Day this year, 12 companies began to implement price increases. After the Lunar New Year, the price increase of tires has been stretched again. From March 1, many brands, including Zhengxin Rubber and Makis, will increase their prices.

In response, a number of industry insiders believe that the competitiveness of companies that win by low cost in the market has clearly declined in the multi-increase price. Song Tao, an analyst at Shenwan Hongyuan, stated that in the downturn of the industry, small companies withdrew from production due to financial disruption or environmental protection failures, and the supply of the industry contracted and accelerated to leading companies. In his view, continuous improvement of industry competition will help leading companies to seize market share and enhance profitability.

A number of manufacturers issued price notifications

According to relevant media reports, Zhengxin Rubber Taiwan Co., Ltd., which officially started production after years, has announced that since March, the price of tires and passenger car tires will be increased since the stricter environmental standards and tire raw material prices have risen. They were about 2%-3% respectively; at the same time, the increase in motorcycle tires and truck tires in the Southeast Asian market was 3% each.

According to a price notification from the "Securities Daily" reporter who got a message to "National Dealers," as early as early February, Masiji, the world's top tire brand under Zhengxin Rubber, has already planned to put its PCR product. Prices rose by 3%-5%, TBR product prices rose 2%-3%, the specific implementation date from March 1, 2018 onwards.

In fact, a number of tire companies had previously issued price adjustment notices before this year. With the New Year's Day in 2018 as the node, according to incomplete statistics, there are 12 tire manufacturers that have implemented price adjustment on January 1st. Including the race wheel brand tire price increase of 2% -3%, double money steel tire price increase of 2% -3%, Xingyuan Group TBR full range of tire product prices increased by 3%.

The Shandong province, where tires are produced and sold, is taken as an example. The price increase of manufacturers is concentrated within 2%-5%. Among them, Shandong Yongsheng Rubber Group has increased its price by 2% on the basis of the original price since January 6, and will not accept advance payments. From January 9, Shandong Hongyu Rubber Co., Ltd. raised the price of all products by 2%-4%. Pulin Chengshan (Shandong) Tire Co., Ltd. has raised the price of all-steel tires and bias tires since January 10, with an adjustment range of 3%-5%.

In addition, according to related industry sources, the foreign tire factories in the Mainland market, including German horse brand, Pirelli and Michelin, also plan to increase the price of car tyres. From the above reasons given by the tire companies, the rise in raw material prices and the implementation of environmental protection policies have brought pressure.

Increased industry concentration

Tire business executives, who are unwilling to be named, told reporters that the environmental protection policies have been introduced more closely than the market itself, and the impact on the tire industry has become more prominent.

In fact, the increasingly stringent environmental protection policy will continue to affect this year. The reporter learned that the "Environmental Protection Tax Law of the People's Republic of China" was implemented on January 1, 2018. At the same time, since March 1, the “2+26” city of Jing-Jin-Ji has fully implemented the special emission limits for air pollution. Enterprises that fail to meet the targets within the specified time limit will face production suspension and rectification, and will be fined.

As a result, some people in the industry believe that most tire companies can only offset the constraints on their production capacity through price increases.

In addition, a person in charge of a small tire company in Shandong interviewed the "Securities Daily" reporter, said that in the case of raw material prices rose sharply, the profits of SMEs have been further compressed due to lack of funds and other disadvantages, if not Timely price adjustments will break the capital chain. However, if prices rise too much and lose their competitive advantage in the market, they are caught in a “dilemma” situation.

In this regard, Shen Wanhong, an analyst at Shenwan Hongyuan, stated that taking Shandong Province as an example, a large number of small-sized tire companies went bankrupt due to financial pressure in the process of raw materials soaring last year; this year, with the gradual implementation of the new and old kinetic energy conversion policies, Shandong is used as a tire manufacturer. In large provinces, the implementation of capacity reduction may exceed market expectations. The continuous improvement of industry competition will help leading companies to seize market share and enhance profitability.

At the same time, some people in the industry pointed out that from the perspective of industry law, the tire industry is an economy of scale. There are hundreds of tire companies in an area that are not scientifically configured. Under the high pressure of environmental protection, under the influence of industrial policies and financial difficulties, the trend of increasing industry concentration will not change with the closure, integration, and acquisition of small and medium-sized tire companies.

Yang Chao, an analyst at Great Wall Securities, believes that with the development of the national automobile industry and the huge amount of car ownership, tire demand is expected to usher in high growth, and the leading competitive advantage of the industry will gradually expand.