The measures for “de-capacity” requested by the central government of China have been carried out further.
“De-capacity” is one of the most significant tasks of provincial localities in this year’s supply side reform.
“De-capacity” in tire industry has been put into the agendas by some provinces. China’s leading tire producer Shandong province particularly involved tire industry in the eight industries with excess capacities to be cut.
An industry insider said that in fact, China’s tire industry had gone through slow adjustment over the past few years, some outdated capacity and uncompetitive companies had been swept out of the market.
Statistics show that from 2010 to 2015, 14 “zombie companies” and 24.8 million low-end tire products were eliminated from the market.
Eliminated "Zombie Companies" and Production During 2010-2015
Among the 14 companies, there were four state-owned firms, eight private firms, and two firms from Hong Kong or Taiwan.
An insider with the Tire Division of China Rubber Industry Association said China’s tire companies have been struggling ahead in the process of industry reshuffle.
With regard to the investigations made in 2015, the situation of the 40 member companies of the associations diverged.
Eight companies, including two foreign-funded, were losing-making accounting for 20% of the total;
Nineteen companies, including five foreign-funded, reported both output and profit drops, accounting for 47.5%;
Four companies reported more output but fewer profit, accounting for 10%;
And nine companies, including two foreign-funded, saw both output and profit growing, accounting for 22.5%.
In 2015, China’s tire output totaled 565 million, slightly more than the previous year, but the capacity utilization of the entire industry was below 70%.
That means China had an excess tire capacity of 30%.
The central government’s supply side reform on industries with excess capacities is mainly through market behavior.
The government authorities have been implementing the access system of tire industry, which may reduce some of the low-end excess capacity.
