Recently, the reporter came to Xiamen and visited a number of tire dealers, senior industry experts and scholars, and conducted in-depth investigations on the major issues faced by the tire industry, such as "profit margin", "low threshold" and "order disorder."
The survey found that since 2013, with the continuous drop in domestic natural rubber prices and the impact of the e-commerce market, tire prices have “slippedâ€, and tire manufacturers and distributors are stuck in a “price war†quagmire. “The tire industry has entered the winter†has become a well-recognized fact in many industries; tire distributors who are on the front line of sales are also trying to break through the dilemma of tire sales through diversified channels such as improving service quality, expanding sales of auto parts, and repairing services. 
Reporter Visits Xiamen Strait Auto Parts City
Difficulty 1: The price of rubber fluctuates
According to statistics, in 2014, China produced 23,722,900 cars, an increase of 7.3% year-on-year. It sold 32.491 million cars, an increase of 6.9% year-on-year. Its production and sales volume remained the world's largest. The annual output of tires as key auto parts exceeded 500 million. Ranked first in the world. According to statistics, by the end of 2013, the number of enterprises in the domestic automobile manufacturing industry above designated size reached 11,599, an increase of 1,030 from the previous year; the number of tire manufacturers above designated size reached 317, an increase of 26 over the previous year.
The huge amount cannot hide the cruel reality of low efficiency. In 2014, the price of tires fell by more than 10%. The industry believes that the most important reason is that the raw material for tires – the “new low†of natural rubber prices. The tire industry has widely circulated that "companies do better than rubber buy well", although there is an exaggeration, but still reflects the rubber raw material prices on the profitability of tire companies a major impact. Rubber accounts for more than 50% of the cost of raw materials for tires. The large cycle of increase in rubber prices in the year of 03-11 severely affected the profits of the tire industry. The price of natural rubber has entered a downward cycle of up to 7 years since reaching a high of approximately RMB 43,000/ton in early 11th, and the current drop is as high as 65%. Market participants believe that the supply growth rate in the future is still relatively fast, and it is highly probable that natural rubber prices will fall below 12,000 yuan/ton, and if the price falls below 8,000, it may be possible. Before 2018, it will operate at a low probability. The gross profit margin of the tire industry will continue to rise.
Du Yuxi, chairman of Sailing Co., Ltd., has publicly stated that in a short period of time, companies may taste the “sweetness†brought about by the cost reduction. However, in the long-term, rubber prices will fluctuate too much. "On the one hand, price fluctuations have greatly increased the difficulty in pricing corporate products and are not conducive to normal product trading. On the other hand, tire sourcing companies have also continued to struggle: rubber prices have fallen, and tire prices have also dropped, leading tire companies to be equal. Tied on the chariot."
Ding Changfa, an associate professor at the Department of Economics at Xiamen University, explained in an interview with China Tire Business Network that the data on automobile growth is beautiful, and the decline in the profits of tire companies is also true. “Because of the overcapacity in the auto industry, the benefits are not good, and the ordinary tire companies in China are certainly not good enough. The drag on the downstream demand has slowed down the industry and the number of tire companies in China that are about to be eliminated will be very sad.â€
Difficulties II: Low barriers to market entry
"Three steps and one whistle, five steps and one post" can describe the current status of tire production and sales in China. According to media reports, the concentration of domestic tire industry has been relatively low. Since 2000, the tire investment in the country has continued unabated, springing up more than 500 manufacturing companies, and annual production of more than 1 million sets of less than 30%. 
Wang Weilin (Malaysia Tire Dealer)
Wang Weilin, a distributor of Xiamen horse brand tires, revealed that the tire production and distribution threshold is relatively low compared to other auto parts such as lubricants. In terms of tire production, Chinese tires lack the necessary supervision. The threshold of certification standards is too low, the quality of tire products varies greatly, there is a mix of pros and cons, and there is also vicious competition in the industry. There is even a chaos - as long as there is money, you can "open the factory to sell tires." Often by hiring an engineer, buying a design drawing, applying for a loan and land, a small tire company is created; In terms of sales, investment in tens of thousands of yuan can open a small store selling tires. Coupled with the low-cost competition of e-commerce, the market for traditional tire dealers is getting smaller and smaller, and profits are getting thinner.
Struggling to break through: combining online and offline development with multiple channels
Experts said that in terms of market trends, the phenomenon of big fish eating small fish in the tire industry is unavoidable, and it may be in the following forms: merge and merge; some factories are foundries, and some even become wholesalers' foundries; Cross-shareholdings. In 2015, tire marketing will shift from high prices and high gross margins to low-cost, low-profits. Many traditional channels and businesses will disappear due to future market changes. The combination of production and finance, combination of business and trade, and service marketing will be the main ways to make profits.
In addition, according to the industry’s expectation, the channel level of big brands will be further reduced, and retailers’ value will be further enhanced. Thanks to the strong appeal of the brand among consumers and support for distribution and installation services at numerous brand distribution stores throughout the country, the strong vendor-led e-commerce platform will develop rapidly.
Ms. Hung, a Michelin dealer in Xiamen, agrees with the industry's claim that “in the past two years, the development of the caller and the decrease in tire prices, the profit of our shop tires has also become lower. But because the electricity supplier did not provide tire replacement service, this service With high technical content, customers still have to come to our shop to install tires. So recently we have more time-consuming services for changing tires, and we are still very supportive of manufacturers developing e-commerce."
"With the advent of high-speed public transport such as motor vehicles and high-speed rail, many customers choose not to open long-distance vehicles, so tires are less depleted and our tire business is more difficult to do. So apart from tires, we also provide some quick repair services such as replacement. With spark plugs, brake pads and engine oil, business is still OK, said Wang Weilin.
Postscript: In 2015, China entered the new normal economy, international crude oil prices plummeted, the domestic economy accelerated decline, and downstream demand shrank dramatically. With the implementation of the strongest environmental protection policy in history, the tire industry will enter the big reshuffle pattern. The rise of e-commerce and the transformation of channels, in the face of unpredictable markets, the healthy and orderly development of the tire industry requires the tire industry practitioners to seize the opportunities, hard work, to meet challenges, but also need the correct guidance and support of government policies.
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