Chinese enterprises from big to strong, the domestic forward market size will exceed 500 billion yuan

First, industry introduction: the foundation of the development of the automobile industry

As an important part of the automobile, the tire is the foundation of the development of the automobile industry. As an important supporting industry of the automobile industry, the tire industry is closely related to the economic development of China. In recent years, China's tire industry has achieved rapid growth, since 2006 has been firmly ranked in the world's largest tire producer and rubber consumer, tire production accounts for about a quarter of the world's total output. With the continuous development of China's transportation, automotive machinery and other industries, the status of the tire industry in the national economy is expected to continue to improve.

(1) Classification of automobile tires

According to the "China's automotive tire industry development trend analysis and future prospects forecast Report (2023-2030)" released by the research Report network, it is divided into bias tires and radial tires according to structural design. Bias tire has the characteristics of high tread and side strength, but the side stiffness is large, the comfort is poor, and the movement and friction between the cord layers are large at high speed, so it is not suitable for high-speed driving. Radial tires were first invented by Michelin company in 1946, compared with ordinary bias tires, radial tires have low rolling resistance, good adhesion, large elasticity, strong cushioning force, large bearing capacity, wear resistance and puncture resistance, but the manufacturing technology is relatively complex and the cost is high. According to the different body, radial tires can be further divided into full steel and half steel. All-steel radial tire refers to the tire whose body and belt layer are all made of steel cord (only one layer of steel cord layer); Semi-steel radial tire refers to the tire with fiber material for the body and steel cord for the belting layer (only 2-3 layers of fiber cord).

According to whether there is an inner tube, it is divided into tubeless tires and tubeless tires (also known as atomic tires or vacuum tires). At present, tubeless tires have been widely used. This combination of tires and steel wheels that directly rely on the rim to seal the tire pressure eliminates the hidden danger of blowout, makes driving safer, reduces weight, and saves fuel.

According to the use, it is divided into automobile tires (including cars and light load (light truck) tires, heavy tires), construction machinery tires, agricultural tires, industrial vehicle tires, power tires, motorcycle tires and aviation tires.

(2) The industrial chain

Upstream: composed of chemicals with strong periodicities, price fluctuations directly affect tire profitability. The upstream includes natural rubber, synthetic rubber, steel cord, carbon black and synthetic fiber. At present, rubber accounts for about 30-50% of the production cost in the raw material cost composition of tire products, so the impact of natural rubber and synthetic rubber on the cost of tires is more prominent in all kinds of raw materials.

Midstream: Capacity cycle determines long-term price, inventory cycle affects short-term price. Tire is a capital-intensive and technology-intensive industry, the production capacity construction cycle is long, from investment to production capacity is usually more than 5 years, so there will be no significant change in tire supply in a short time; The effect of the inventory cycle is on the one hand to guide demand, and on the other hand to catalyze short-term price movements due to short-term inventory overhang caused by, for example, winter power rationing in the north.

Downstream: the automotive field accounts for the highest proportion, and the production and sales volume and the ownership determine the prosperity of the demand side. Downstream includes passenger cars, trucks, construction machinery vehicles, agricultural and forestry machinery vehicles, industrial vehicles, aircraft, special vehicles and other applications. Among them, the automotive field has the highest proportion of tires, and its industry prosperity will affect the scale growth of tire manufacturing in the middle reaches.

Second, demand: the proportion of semi-steel is high, and the total amount of replacement market is large

The downstream tire covers passenger cars, commercial vehicles, engineering machinery and other fields, the main area is still the passenger car field, in recent years, the passenger tire (semi-steel radial tire) sales accounted for nearly 90%, so the tire industry development and the automotive industry is highly related. The automobile industry is more obviously affected by the macroeconomic and downstream demand boom cycle, but the special consumption attributes of tire products make the tire industry boom independent of the automobile industry, different from the attributes of automobile optional consumer goods, tire as a kind of essential consumer goods, its demand rigidity is greater than the automobile industry. As one of the essential parts of the car, the output of tires depends on the output and ownership of the car. In the early stage of development, car ownership is less, and tire demand is mainly affected by automobile production; With the gradual increase in ownership, tire replacement demand exceeds supporting demand to become the main factor affecting the tire industry.

(1) Passenger cars: The steady rise in car ownership will drive the expansion of the replacement market

The size of the replacement market depends on vehicle ownership and replacement cycle. In terms of car ownership, China's car ownership ranks first in the world, with 319 million cars by the end of 2022. In terms of replacement cycle, it is usually required to replace 5 years or 60,000-80,000 kilometers. According to Linglong Tire prospectus, the average number of tires replaced per car per year is 1.5 / year, that is, the replacement coefficient is 1.5, based on the current national car ownership of 319 million in 2022, the domestic car tire replacement market size is as high as 479 million.

(2) Commercial vehicles: The replacement market performed well, and infrastructure investment supported growth

Demand for commercial vehicles peaked and fell in the short term. In 2021, China's commercial vehicle production reached 4.674 million units, down 10.7% year-on-year, ending the previous rapid growth trend, and commercial vehicle production and sales declined further in 2022, and the industry is in the trough stage of the adjustment cycle.

(3) Non-road tires: Oblique off-road tires are still growing demand

Demand for construction machinery tires continues to grow. With the vigorous development of the port transportation industry at home and abroad, the rise and expansion of the mining industry, the popularization of modern manufacturing logistics mechanization and automation, and the developing countries along the Belt and Road and South America vigorously promote infrastructure construction, which has strongly promoted the continuous growth of the demand for special tires in the engineering industry; According to relevant data, the global off-highway tire market in 2021 is 8.7 billion US dollars, and will grow at a compound growth rate of 5% to 11 billion US dollars in 2021-2026, and the market space is broad.

Agricultural mechanization drives up demand for agricultural tires. Benefiting from the continuous increase in agricultural machinery and equipment and the increasing demand for agricultural replacement tires, the demand for agricultural tires continues to rise. 2019 data from the Ministry of Agriculture and Rural Affairs show that China's agricultural mechanization rate is 69%, while developed countries are generally more than 90%, of which the United States, Japan and South Korea are more than 99%. With the improvement of China's agricultural mechanization rate, the domestic demand for agricultural tires will further increase.

(4) Supporting market: The increase in the supporting market is driven by the penetration of new energy and domestic substitution

Demand for passenger vehicles recovered, and the penetration rate of new energy sources further increased. China's new energy vehicle industry is developing rapidly, from the monthly output and sales of less than 100,000 in the past three years to the monthly output and sales of 762,000 and 714,000 in October 2022, respectively, and the penetration rate has risen from less than 5% to about 30%. Under the background of the recovery of downstream demand and the volume of new energy, the market space for tires as a core auto parts is huge.

Domestic tire brand matching rate increased. Compared with the alternative market, the supporting market has higher requirements, stable supply demand, and stronger brand recognition. At the same time, users' pursuit of "original" helps cultivate the brand share of the alternative market in advance. With the rapid development of China's new energy vehicle market, Chinese tire brands are expected to achieve penetration of the supporting market with the help of the new energy track.