Can the "Labeling Method" Lose China's Tire Competitiveness?

Recently, in the production workshop of a large-scale tire group in Dongying, Shandong, the editors saw that the tires that will be exported to the European Union are labelled in accordance with the requirements of the “label regulations”. The labels indicate: rolling resistance E level, wetland holding force level B, Noise is 75 decibels.

Asked whether domestic technology can improve the rolling resistance of tires to B level, the relevant personage of the group's technology research and development department said: “It can be achieved, but in that case, the cost of the product will increase greatly.”

Concerns about rising costs have become a major “heart knot” for most Chinese tire companies that “win by price”. So, does the "Labeling Law" mean the end of the price competitiveness of Chinese tyres in the European market?

Rising costs are not fatal to the company

According to reports, tire rolling resistance, wetland grip and noise performance improvements can be achieved through various means, such as the use of new technologies, raw material upgrades, and the development of new tread patterns. However, in accordance with the requirements of the European Union's "Labeling Law," it is necessary to increase a grade, such as rolling resistance from E to D, which will have a significant impact on the cost of tire products. Moreover, the cost increase is also related to the type of tire. The same upgrade route, the heavier the tire, the greater the impact on the product cost.

For a long time, Chinese tires have been ranked in the low-end tire market in countries around the world with “big and inexpensive” tires. The number of tires exported to the European Union has also risen steadily in the United States during the past few years. In 2009, 15% increased to 18.43% in 2011.

If, as stated by the above-mentioned sources, the cost increase caused by pursuing product quality upgrades, the price advantage of China's exported tires will be greatly reduced, then will its competitiveness in the European market be weakened?

The editor contacted Mr. Zhang, a deputy general manager of a large tire trading company. He said that in the impact of technical barriers, the increase in corporate costs is almost inevitable. "But as far as the European market is concerned, the cost competitiveness of domestic tire products caused by this increase in costs will not be a 'killing injury' for export companies."

Mr. Zhang believes that in the European market, the price of high-end tire products is almost double that of China's export of tire products. Even if the price of tires for Chinese exports rises by a large margin, there will still be a big gap, so there is no need to worry about competitiveness.

However, there are also industry analysts believe that China's large number of tire companies, uneven size and strength, large companies are subject to a small "threat" event, it may become the "Waterloo" of many small businesses.

"Is it not up to standard" or "I do not want to achieve"?

The editorial telephone contacted a tire company known as “low-priced products” in Shandong. Asked whether domestic tire companies will lose their price advantage in the export market due to the increase in costs caused by the "Labeling Act." The person in charge of the company thinks that the impact on small and large enterprises is different.

He said that for large companies, on the one hand their technical level is higher, "try hard at least to meet the minimum standards required by the regulations"; and some companies with large export volume in the European market, such as Double Star tires to export The tires in the area accounted for 60% of its total production, and they have to rely on this market for a while. Although the cost has risen, they still have to bow under the roof.

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