China's tire industry is a growth logic, and high-quality tire companies are expected to be among the world's top

2.1 External: Policy & Automobile export & new energy, tire enterprises to meet the opportunity for leapfrog development

From the external environment, we believe that domestic tire enterprises have ushered in a leapfrog development opportunity. First, under the policy push, 2023-2025 domestic backward production capacity is expected to accelerate clearance, and the development of high-end tire projects is supported. On August 18, Shandong Province, a major tire production province, issued a document clearly pointing out that for tires and casting enterprises below the energy efficiency benchmark level, it is necessary to ensure that the energy efficiency transformation and improvement program is completed by the end of April 2025; It is necessary to speed up the elimination and withdrawal of low-end projects, and submit the exit projects of various cities to the relevant departments before the end of September 2023. This move will speed up mergers and acquisitions within the industry, promote industrial upgrading, weaken the price of internal volume, form a differentiated competitive pattern, the head of the enterprise can "the stronger the stronger", positioning the global head enterprises; Second, China's automobile export volume ranks first in the world, Chinese tire enterprises are expected to leverage China's strong automobile industry to further expand overseas markets, enhance visibility to achieve leapfrog development; Third, the evaluation system of new energy automobile tires weakens the brand influence of traditional tire companies, and provides domestic tire companies with the opportunity to compete at the same starting line. A number of Chinese domestic tire brands have been included in the supporting/replacement system of ordinary models and high-end models of new energy vehicles, which is expected to lay the foundation for entering the tire supply system of more foreign car companies and establish long-term comprehensive competitiveness with the help of the leading position of Chinese auto companies in the new energy vehicle market and the huge export volume.

First, in recent years, China's backward tire production capacity has accelerated its withdrawal, and industry concentration has been improved. Taking Shandong Province, a major tire production province, as an example, in 2021, Shandong issued the notice of the Province's Implementation of the "Three Resolute" Action Plan (2021-2022). It is proposed that by 2022, all steel radial tires with an annual output of less than 1.2 million (except engineering tires, aviation tires, and wide section tubeleless) and semi-steel radial tires with an annual output of less than 5 million will be integrated and withdrawn. According to data from the Shandong Provincial Department of Ecology and Environment, from January to October 2022, Shandong Province shut down 11 tire production enterprises and eliminated 19.8 million backward and inefficient production capacity. At the same time, from the perspective of the internal development law of the tire industry, the domestic industry has also ushered in the integration of the good and bad, and some high-quality tire enterprises have carried out horizontal and vertical mergers and acquisitions to enhance their own strength, and the concentration of the domestic tire industry has further improved. The clearance and integration of domestic tire production capacity, the optimization of the development environment of domestic tires, the industry phenomenon of racing to compete at low prices is expected to gradually improve, tire companies will have a better research and development innovation and marketing environment, can further cultivate internal skills, improve the quality of domestic tires and brand image.

Policy upgrading, clear 2023-2025 important time node, to promote tire focus on high-end, intelligent, green, cluster development, industrial upgrading has become the main theme, the industry or will accelerate mergers and acquisitions reshuffle, the competitive environment is expected to further optimize. On August 18, 2023, the Shandong Provincial Development and Reform Commission issued the Notice on Matters related to the optimization of tire casting project Management (hereinafter referred to as the Notice), which pointed out that it is necessary to support the accelerated development of high-end projects, promote the transformation and upgrading of mid-end projects, accelerate the elimination and withdrawal of low-end projects, and promote the development of parks and clusters. The "Notice" clearly points out that it is necessary to promote the transformation and upgrading of mid-end projects, and ensure that the energy efficiency transformation and upgrading program is completed before the end of April 2025 for tire and casting enterprises below the energy efficiency benchmark level; Low-end projects should be submitted to the relevant departments before the end of September 2023 to withdraw from the project, and accelerate the elimination of low-end projects. Under the guidance of the "Notice", the development of high-end tires has been supported, and small and medium-sized tire enterprises that lack funds for upgrading and transformation will accelerate clearance, and the industry will usher in further reshuffle. At the same time, technology and intelligence are the focus of the "Shandong Province High-end tire casting project Development Guidance Directory (2023 edition)", and the tire industry is expected to form a multi-level and differentiated competitive pattern.