View From Europe: China Tiremaker Consolidation Impacts World

Time: June 16th  2015   Copy editor: Tyrefull

Editor’s Note: Europe’s Tyres & Accessories magazine has been closely following the shifts in China’s tire industry, and has reported extensively on how plant closures, business failures and consolidations are impacting tire markets in other parts of the world, including the U.S. This editorial appears in T&A’s current issue.

A couple of months ago we discussed the “restructuring” of relatively large and modern Chinese manufacturer Deruibao Tire. Back then, Qingdao Doublestar was top of the list of firms connected with an acquisition/cooperation/merger rescue orchestrated by the local government. A month later government-owned ChemChina announced that it was buying Pirelli Tire. This latter point has been covered in some depth in the pages of Tyres & Accessories, especially in our April edition.

The Pirelli/ChemChina story will no-doubt garner more attention as the very complex outworkings of the deal are walked out, but what remains of interest is the way in which both the local Chinese market and the global industry are engaged in a period of both parallel and interconnected consolidation.

On the global scale, as we discussed in April’s magazine, there are a number of large manufacturers that remain potential merger and acquisition targets ranging from Cooper all the way up to Goodyear. There has even been talk of a competitive counter offer for Pirelli – although this always sounded far-fetched.

What’s interesting is that – so far – what are often if somewhat imprecisely called the ‘emerging’ or ‘developing’ markets have played key roles throughout. In the case of the halted acquisition of Cooper a couple of years back, growing Indian player Apollo’s bid was brought to an end by Cooper’s Chinese joint venture partner Chengshan, which wanted to bid for Cooper itself. Now ChemChina/Aeolus is well on the way to buying Pirelli and there is even talk of other Chinese bidders in play.

On a domestic level, the de facto merger of Sailun and Jinyu ran in parallel with the growth of the largest Chinese players, pushing already-ambitious players towards intra-market consolidation. We have discussed the reasons why some tire factories have and are failing China owing to oversupply and poor value strategies before, but the local competitive environment is also another key factor.

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