Cars

Tire rules may boost industry

By Li Fangfang (China Daily)
Updated: 2010-10-13 11:07

BEIJING - New regulations on China's tiremakers could provide a boost for the industry, according to analysts.

"It will help to encourage mergers and acquisitions among medium and large tire companies," said Chen Aihua from Guosen Securities.

"That will improve the industry, making it healthier, more competitive, and sustainable."

The Ministry of Industry and Information Technology on Monday unveiled the long-anticipated regulations.

They include new guidance on adjustments to industrial structures, product upgrades, investment management, and entry limitations.

Related readings:  Tire firm may open China plant  Tire makers set sights on pricey wheel market  Tire makers see thin margins as costs soar  Tire makers take it on the chin

The government hopes the regulation will help to force a turnaround and see the tire industry change from one of high energy consumption and low capacity, to one of low energy consumption and high capacity, said the ministry.

The regulation requires that the industry will gradually raise production of radial tires across the spectrum.

All tires produced for passenger vehicles in China will be of a radial design by 2015.

That figure falls slightly to 85 percent in the light-duty commercial vehicle market and 90 percent for heavy-duty commercial vehicles.

The government will only approve the new projects for tire makers with capacity of more than 1.2 million tires for heavy-duty commercial vehicle and 6 million for light commercial vehicles and passenger cars.

Moreover, the government will not approve any new or expansion projects for tiremakers before 2011.

"It will be an effective measure in curbing the unnecessary glut in the industry, and, obviously will help make China's larger producers more competitive," said Chen.