Several Chinese tire manufacturers are mulling over a price hike in their products by adopting a unified pricing mechanism in a collective way, according to industry insiders at the recent 11th edition of the China International Tire Exhibition.
The insiders disclosed that a few firms had been in talks over the issue, but no detail or the exact time table had been released concerning their agreement.
Reporters with Tireworld have been trying to get contact with Shandong-based tire producers Shengtai Group and Xingyuan Group, but no positive response had been received so far, while only few tire dealers had confirmed the expected price hike.
One of sources, surnamed Han, expressed his doubts as to whether the plan would be eventually carried out.
Tireworld has learned that most dealers are just slightly interested in the so-called collective price hike plan, while a few of them expect the plan will just fail to go into practice.
A sales person with Beijing-based Nine Square Can Reach Trading Co. told Tireworld that most previous cases like this one had failed.
By giving an example he added that several tire rim suppliers tried to enter into an agreement to raise product prices this April before their plan finally miscarried due to the withdrawal of the participators.
Song Guangzhi, head of rubber unit of the Chem99.com, pointed out that the so-called “alliance” here is never stable, as it is all up to the profit margin in the wake of the price hike. If the margin is high, there will always be enterprises that choose to quit and hence the entire alliance will collapse. “After all the market competition is fierce and no one can afford to lose their clients.”
Nevertheless, many tire enterprises have expressed their intention to raise product prices in the light of mounting cost of raw materials. Then here comes the question: If price hike is an irresistible trend, why do tire makers still need others to join them and make a collective raise in prices?
"Well, this seems the only way out at present since the market demand remains tepid," an insider explained.
True or not the price hike plan may be, the hefty pressure facing the industry can be clearly observed.
Due to waning demand and severe overcapacity problems, most small and medium tire producers are now operating at much lower rates compared with a few years earlier.
To get out of this dilemma, as some insiders put it, effective industrial upgrades will be the key to it in the long term.
(Edited by Olivia, Olivia@tireworld.com.cn)
