High barriers and good profits, enterprises to accelerate the layout

New infrastructure with technological revolution and industrial upgrading as its core has been strongly supported by policies. On April 20, 2020, the National Development and Reform Commission (NDRC) press conference officially clarified the definition of new infrastructure: new infrastructure is an infrastructure system that is guided by new development concepts, driven by technological innovation, based on information networks, and oriented to high-quality development needs, providing digital transformation, intelligent upgrading, integrated innovation and other services. China's "14th Five-Year Plan" clearly states that it is necessary to coordinate the development and construction of new infrastructure, and the new infrastructure is expected to increase the demand for green and high-end construction machinery tires.

(2) In the field of agriculture: Under the general trend of mechanization, the demand for tires will increase

In the context of continuous improvement of mechanization rate in agriculture and increasing agricultural machinery and equipment, we believe that the demand for agricultural replacement tires is increasing, and the demand for agricultural tires continues to rise. According to Mordor lntelligence statistics and forecasts, the market value of agricultural tires in 2021 is 6.248 billion US dollars, and is expected to exceed 8.821 billion US dollars in 2027, with a CAGR of 5.13% in 2022-2027. In addition, by region, Mordor lntelligence expects the U.S. agricultural tire market to grow at a CAGR of 5.36% in 2022-2027, mainly because tire companies have full confidence in the prospects of agriculture, improve production capacity and launch new tire models to adapt to different segments of the tire market. The agricultural tire market in China, Europe and other places is also expected to usher in rapid development.

The downstream of agricultural tires mainly corresponds to agriculture, which is a basic industry to ensure the national economy and people's livelihood. With the growth of the global population, we believe that the demand for agricultural products is expected to increase steadily. At the same time, the price of agricultural products will also have a corresponding promoting effect on the demand for agricultural machinery. From 2001 to 2022, the global corn, wheat and soybean production will all increase with a fluctuating CAGR of 3.16%, 1.48% and 3.36%, respectively. Since 2020, affected by factors such as COVID-19 and the Russia-Ukraine conflict, global food prices have risen, and the global food price index reached 159.71 in March 2022, reaching the highest level in history, far exceeding the level of around 100 in 2015-2019. Although there is a downward trend, it is still higher than the pre-epidemic level. Steady agricultural demand and rising food prices are expected to boost the demand for agricultural machinery, which in turn will boost the demand for agricultural tires.

China's agricultural mechanization rate continues to improve, the use of tractors, tillers, harvesters and other agricultural machinery and equipment is expected to drive the demand for agricultural tires. In terms of agricultural mechanization, according to the statistics of the National Statistical Bulletin on the development of agricultural mechanization in 2021, the comprehensive mechanization rate of crop cultivation and harvest in China in 2021 reached 72.03%, an increase of 0.78 percentage points over the previous year; Among them, the mechanical tillage rate, the mechanical sowing rate and the mechanical yield rate reached 86.42%, 60.22% and 64.66%, respectively. The mechanization rate of animal husbandry, aquaculture, agricultural product preliminary processing and construction agriculture reached 38.50%, 33.50%, 41.64% and 42.05%, respectively. They were 2.72, 1.85, 2.45 and 1.51 percentage points higher than the previous year. The "14th Five-Year Plan" National Agricultural Mechanization Development Plan issued by the Ministry of Agriculture and Rural Affairs clearly indicates that the comprehensive mechanization rate of crop cultivation and harvest will reach 75% in 2025. The agricultural mechanization rate in developed countries is generally above 90%. China's agricultural mechanization level still has great room for improvement.

China has issued a number of policies to promote the development of agricultural mechanization, including increasing the research and development and promotion of agricultural machinery, and increasing subsidies for the purchase of agricultural machinery. The "14th Five-Year Plan" National Agricultural Mechanization Development Plan of the Ministry of Agriculture and Rural Affairs clearly points out that agricultural mechanization is a key starting point and basic support for accelerating agricultural and rural modernization. We believe that with the continuous promotion of urbanization and modernization in China, the new generation of rural population is accelerating the flow to cities and towns, the aging trend of rural labor force is obvious, the shortage of young and middle-aged labor has become the norm, and the labor cost of agricultural production is rising year by year. Accelerating agricultural mechanization is an important way to ensure agricultural development, and there is a broad space for development in the future.