Tire sales pressure in the second half of the year is difficult to solve, and it is difficult to start to open for tire factories

Since May, domestic tire companies have been operating at a low level. As of August 12, the operating rate of semi-steel tire manufacturers was 61.09%, up 0.21% month-on-month and down 5.18% year-on-year. The operating rate of all-steel tire sample manufacturers was 65.88%, an increase of 0.11% month-on-month and a year-on-year decrease of 6.92%.

Figure 1 Comparison of operating rates of domestic tire companies from 2020 to 2021

Source: Longzhong Information

According to calculations by Longzhong Information, the production of semi-steel tires from my country's major tire companies from January to July was about 264 million, an increase of about 22.74 million from last year, an increase of 9.43%; from January to July, the production of all-steel tires from my country's major tire companies was 79.81 million About 2.5 million bars last year, an increase of 3.23%. Due to the impact of the epidemic, the output in February and March was low last year, supporting this year's output to continue to increase year-on-year. Compared with the obvious decrease in production from January to July 2019, the production of semi-steel tires decreased by about 27.6 million, a decline of about 9.47%; the production of all-steel tires decreased by about 3.69 million, a decline of 4.42%. (The above data is for reference only)

Figure 2 Comparison of domestic car sales from January to July 2019-2021

Source: Longzhong Information Collection

In the second half of the year, there are still many pressures for factory start-ups. From the perspective of the supporting market, the car sales data from January to July performed well. The sales of passenger vehicles from January to July of 2021 were 11.56 million, an increase of 21.2% year-on-year in 2020, compared with 2019. A year-on-year decrease of 1%. Commercial vehicle sales from January to July 2021 were 3.196 million units, a year-on-year increase of 12.9% and a year-on-year increase of 29%.

Figure 3 Comparison of domestic passenger car sales from 2020 to 2021

Source: Longzhong Information Collection

The industry is cautious about the room for car sales in the second half of the year. The production and sales of passenger cars in the first half of the year were relatively stable, and the sales volume was basically the same as that of 2019. In the second half of the year, they will still face changes in consumer spending mentality caused by insufficient chips and repeated epidemics. Auto companies are also actively launching new brands and new energy vehicles to boost sales. It is expected that the sales performance of passenger vehicles for the whole year will be better than that of 2020, but will maintain a slight downward trend compared with 2019.

Figure 4 Comparison of domestic commercial vehicle and heavy truck sales from 2020 to 2021

Source: Longzhong Information Collection

Commercial vehicle sales are facing greater pressure, and sales have continued to decline after rising in March 2021. The latest data shows that in July, the production and sales of commercial vehicles were 315,000 and 312,000, respectively, down 33.2% and 30.2% year-on-year. In terms of vehicle types, the production and sales of trucks were 273,000 and 274,000, down 37.8% and 33.8% year-on-year; the production and sales of passenger cars were 43,000 and 38,000, respectively, up 25.5% and 16.4% year-on-year. It can be seen that the National VI regulations in July had a great impact on truck sales. The industry said that the sales of various trucks will still be sluggish from August to December.

The export market is still facing problems such as high ocean freight rates and tight bookings. From the quotations of some shipping companies we have learned, domestic ocean freight to Japan, South Korea, Southeast Asia and other regions after the Spring Festival is basically operating smoothly. For example, from The ocean freight quoted from Qingdao Port to Vietnam Caterpillar 40-foot container basically runs at USD 1,000-1100, and the ocean freight quoted from Qingdao Port to Malaysia Port Klang is at 1500-1600 USD. The ocean freight quotations sent to the Middle East, the Americas, Europe and other regions have been on the rise. The ocean freight for 40-foot containers sent from Qingdao Port to ports such as Saudi Dammam and Dubai Jeb Ali has risen from USD 3500-360 at the beginning of the year. US$7700-7800. Sea freight to Europe and the Americas has risen from around US$9,000 at the beginning of the year to US$15,000-20000. The Middle East, the Americas, and Europe are the regions where domestic tires are exported intensively. The continuous increase in ocean freight has increased the export pressure of domestic tire companies.

The performance of the supporting and export markets was weak, and various tire companies increased their competition in the domestic replacement market, and the price war intensified during the year. In the context of continuous high prices of raw materials, corporate profits have been continuously compressed, which has led to low enthusiasm for companies to increase production. September and October are the traditional peak season for domestic demand, and it is also the time node for foreign customers to replenish goods. Driven by rigid demand, business operations are expected to rise. Entering November, the repeated autumn and winter epidemics and environmental protection and other factors will once again drag the start of construction, and it is expected that the overall start of construction will be significantly weaker than the same period last year.