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On a roll, tire makers expand outlets

By Xu Xiao | China Daily | Updated: 2013-10-21 07:07

Global players vie in market known for brand loyalty

Tire makers from home and abroad are on a roll in China as they rapidly expand their sales outlets to compete for a share of a market estimated at 120 million replacement units annually.

Among them is the Singaporean brand Giti, which opened 1,700 sales and service outlets around the country between 2009 and 2012.

By April last year Germany's Continental had 1,680 authorized outlets, according to the industry website Gongchang.com.

And the real battle is in smaller tires.

With about 67 percent of the cars on the road powered by engines sized at 1.6 liter or less, top brands such as Continental from Germany and Michelin from France are powering up to meet the demand.

Michelin entered the country's medium and low-end segment by bringing its Warrior sub-brand in 2012.

Continental introduced an affiliated brand called Virgin in China last February to cater to the same market.

Because of Chinese customers' loyalty to original equipment, tire maker strategies embrace both the OEM - original equipment market - and replacement sales.

According to a recent JD Power study, new vehicle owners who are satisfied with their originally equipped tires are likely to buy the same brand when their first tires wear out. According to the survey, 47 percent say they definitely would choose their original brand when replacing tires.

Statistics also show that sales volumes in the OEM and replacement segments in China are almost equal, so getting a head start as original equipment is crucial to long-term development in the replacement market. In 2012, Michelin reported a 6 percent sales growth in OEM tires for cars and light-duty commercial vehicles. On tire replacement market, the growth was 4 percent, according to Gongchang. com.

In the first quarter of 2013, Michelin's sales grew 15 percent year-on-year in OEM tires and 11 percent in the replacement market. Goodyear reported its sales grew 5 percent in original equipment OEM and 4 percent in the replacement segment in the first three months.

"Tires are one of the most frequently replaced components," said Mei Songlin, vice-president at JD Power China in Shanghai. "Consumers cannot choose tires for their new vehicles on delivery, but they have a wide range of options when replacing them. So a good experience with their first tires will have a positive impact on decisions when replacing tires," Mei said.

xuxiao@chinadaily.com.cn

 On a roll, tire makers expand outlets

A technician services a tire in Lin'an, Zhejiang province. Top tire makers including Continental and Michelin are scrambling to meet surging demand in the world's largest auto market. Hu Jianhuan / for China Daily

 

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