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Final Ia Tyre Report

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INTRODUCTION In the late 1980s the world tyre industry saw major restructuring and consolidation. Main reasons stated were economies of scale and more market share, but the real reason was to get a presence in the market of North America. General Tire was bought by continental of Germany in 1987; Bridgestone of Japan purchased Firestone in 1988, while Pirelli acquired Armstrong Tire. Michelin of France bought Uniroyal Goodrich and Yokohama of Japan bought Mohawk in 1989. Goodyear resisted acquis
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  INTRODUCTION In the late 1980s the world tyre industry saw major restructuring and consolidation. Mainreasons stated were economies of scale and more market share, but the real reason was to geta presence in the market of North America. General Tire was bought by continental of Germany in 1987; Bridgestone of Japan purchased Firestone in 1988, while Pirelli acquiredArmstrong Tire. Michelin of France bought Uniroyal Goodrich and Yokohama of Japan bought Mohawk in 1989. Goodyear resisted acquisition, but had to diversify into oil sector due to lots of debt.At present the world tire industry has nine companies with annual sales more than $1 billion..The tire companies in order to make their operations a total system have gone to own or control rubber plantations in Asia or exercise authority over their distribution systems. Cooper Tire has been a strong niche player all the while. COMPETITIVE STRATEGIES Tire companies compete on the basis of factors like control of raw material, product, price, promotion, and distribution. Large firms in developing nations obtain concessions on taxes,incentives for exports, restrictions on imports, licensing, etc. Of late, the Asian countries producing natural rubber have shown bargaining power. Multinational companies and hostgovernments do negotiate on the issue of building large manufacturing plants like Firestone inMorocco.Sometimes pricing wars occurred, but peaceful solutions were found, e.g., betweenBridgestone/Firestone and Michelin. Most integrated firms tend to be the low-cost producers;and are able to survive prolonged price wars. Companies like Pirelli tried joint ventures andacquisitions, cutting employment, abandoning non-tire businesses but could not succeed.Heavy promotion is done through electronic and print media; frequently taking full page adsin daily and Sunday newspapers. Distribution is done via company-owned stores and alsothrough independent dealers. GLOBAL SCENARIO    Overview of current scenario In 2008, global economy saw a meltdown and the automotive industry was also a part of that. By the end of 2008, major automotive companies had a tough time maintain their reign.Compared with that in 2008, the auto sales volumes in Europe and USA declined in 2009.The demand for replacement tires derived the growth of the tire market with the growth of auto reserving volumes.In the Asian tire market, the Chinese and Indian markets have been strong players thoughJapanese tire market moved downwards at the end of 2008.This resulted in high prices by tire manufacturers, Goodyear by 6% since December 1st, 2009 being the first one to do so. Bridgestone Americas, Continental North America andYokohama Rubber followed. Since January 1st, 2010, Bridgestone has raised the tire price by5%. The price growth rate is about 5% for tires of Continental North America and 6% for alltires of Yokohama Rubber.In India, there is huge demand in the tire market but the storage of tire manufacturers hasdecreased to the level equal to the total production of 20-25 days. So in Indian market tire prices was raised by over 5% at the beginning of 2010. All the price increase was due to theextremely high prices of raw materials. Heavy rain and flood relentlessly affected the rubber  production in Malaysia, India, Thailand and Indonesia in November 2009. As a result, rubber  production from these major rubber producers suffered significant decline. The strongdemand resulted in increased price of rubber.Another factor lashing the increase in price of tires was USA¶s special tariff on Chinese passenger/light truck tires. It affected China¶s tire export to USA and caused world tiremanufacturers to raise the price.Tire price increase aroused new tire investment frenzy in the world. After the occurrence of the financial crisis, tire giants almost stopped all the plans of production expansion. At thecommencement of 2010, the production expansion and construction of new projects wasresumed. Bridgestone has plans to perk up the production capacity of passenger/light truck tires in its Kheda plant to 15,000 per day with the investment of USD 56.30 million. Pirellihas declared to invest USD 100 million in Brazil and Latin America for the production of   OTR (off-the-road) tires and agricultural tires. Toyo Tire & Rubber Co., Ltd has announcedthat it will lay down a new tire plant in Southeast Asia. Cooper will add USD 10 million toimprove the automatic production level of its tire plants; meanwhile it declared to improvethe production capacity of its plant in Texarkana and expand the production facilities inArkansas and Mississippi of USA, Guadalajara of Mexico and the joint venture in Kunshan,China. In tire trade in the world, China has continued being the world largest tire export country since 2004.In recent years, Chinese tires have sustained anti-dumping investigations by USA, Venezuela,Australia, Brazil, Peru, Egypt, Argentina, Turkey, South Africa, Mexico and India, etc. Complete tireindustry chain, huge tire demand, advantages in energy and labour resources in China encouragedtire enterprises from different countries to increase their investment in China successively.According to forecast global status of Chinese tire industry will remain the No.1 by tire exporter inthe coming years. Rampant growth of production cost and the sharp decline of profit growthrate are worrying the Chinese tyre industry. In April 2010, the price of natural rubber reachedabout 25,900 CNY/ton, rising by over 100% YOY. The expenses of water, electricity and gasare rising continuously along with the labour cost. Chinese tyre enterprises also increased thedomestic sales price and export price of tyres at the end of 2009 and the beginning of 2010, but the growth rate is only 3%-5%. The U.S. industry is primarily engaged in manufacturing tires and inner tubesfrom natural and synthetic rubber. The industry comprises of Tire Manufacturing Industry, RubberProduct Manufacturing Industry Group, Plastics and Rubber Products Manufacturing Subsector, andthe Manufacturing Sector. Revenue for the year 2009 was approximately $14.2 billion USD, with anestimated gross profit of 17.38%. Import was valued at $8.1 billion USD from 71 countries. Theindustry also exported $3.9 billion USD worth of merchandise to 171 countries. The total domesticdemand for the industry in 2009 was $18.4 billion USD.  UK tyre producers and suppliers will face a number of legislativechanges during and after 2010. In March 2010, new S-marking legislation aimed at reducingnoise from tyres is set to come into force. In November 2010, EU tyre-pressure monitoringsystem (TPMS) legislation is due to be introduced, and from November 2012 all new tyres onsale in Europe will need to be classified and labelled for fuel efficiency, wet grip and noise performance. UK market for rubber tyres and tubes is expected to show some recovery in2010 due to the growth of economy which has a positive impact on demand for automotive   products, including tyres. Whereas new car registrations in the UK are currently forecasted todecline further in 2010.Levels of growth in the UK tyre market are expected to remainmodest over the period to 2014.  W orld OE tyres fitted to new passenger cars assembled in North America, W estern Europe, J, Korea, India and Australia, 2005 2006 2007 2008 2009 2010  North America32,100 33,770 31,715 30,490 28,810 30,500Western Europe72,225 70,580 71,590 65,100 55,275 58,015 Japan 45,780 49,410 49,900 48,575 46,410 47,495China 15,620 21,520 26,940 28,750 28,630 31,925 Argentina 915 1,315 1,755 2,120 2,505 2,805 Brazil 9,310 9,590 11,330 12,625 12,760 13,300 Korea 17,005 17,745 18,920 17,810 17,360 16,715 India 6,205 7,180 8,370 8,955 9,150 10,365 Australia 1,600 1,430 1,535 1,550 1,585 1,595 Total 200,760 212,540 222,055 215,975 202,485 212,715
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