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Price cuts impact joint venture brands
Recently, news from the tire market showed that the price of Michelin brand tires produced by Shanghai Michelin Warrior Tire Co., Ltd. (abbreviated as Shanghai Michelin Warrior) has been reduced in large scale, resulting in the impact of the joint venture's Warrior brand tires.
Shanghai Michelin Tire Co., Ltd. is a joint venture formed by Michelin in France and Shanghai Tire & Rubber Co., Ltd., but it has recently been rumors that the contradictions between the two sides have been constantly escalating and even the possibility of splitting has emerged.
"Michelle tires were originally in the middle and high-end market, but after the price reduction, they have already gradually seized the market share of the low-end tire market." According to sources close to the Shanghai Michelin company, "after the price of Michelin, the most affected is the pull back. "Tire." And this also added instability to the joint venture's cooperation.
On December 14th, our reporter called Chen Qihua of Michelin's China Communication Department and asked about the price cuts of the Michelin brand tires and the split rumors of shareholders of Shanghai Michelin. Chen said that the Pull Back brand is a very important asset of the Michelin Group. Michelin China has three major brand pillars: Michelin, Warrior and Bailu Chi. Under this multi-brand strategy, Michelin has the largest market share in China's passenger car replacement market. Therefore, Michelin will continue to adhere to the development of our multi-brand strategy. Michelin always pays close attention to the trend of market prices, and adjusts prices according to various factors such as market conditions, changes in customer demand, and raw material prices.
In April 2001, Michelin Group and Shanghai Tire & Rubber Co., Ltd. and other shareholders jointly formed the Shanghai Michelin Warrior. Michelin purchased the assets of Pulley Car Tyre Factory for US$170 million, of which Michelin Holdings 70% and Shanghai Tire & Rubber Co., Ltd. held 28.5 shares. %, the remaining 1.5% is held by Shanghai Tire Corporation and another Shanghai company.
The loss of the joint venture for several years made the Chinese and foreign parties disagree on their operating mechanism. In 2004, the joint venture company had a loss of 125.20 million yuan, a loss of 54.9955 million yuan in 2005, and a loss of 75.356 million yuan in 2006. So far, due to many factors such as the management system and personnel conflicts, the cooperation between the two sides has not been very enjoyable.
Analysts believe that Shanghai Michelin will produce Michelin brand tires and pull back tires at the same time. The downward pressure on Michelin brand tires indicates that Michelin has already begun to advance to the low-end market and prepares for the breakup. Once it breaks up, Michelin can not only To maintain the high-end market, and can successfully enter the low-end market.
However, the price of Michelin-branded tires, which belong to the same factory-owned product, directly impacts the market of Pulley brand tires, because Michelin and Warrior are high-end and mid-to-low-end brands, respectively.
Sources said that Michelin's price cuts have shown that the uncertainty of the cooperation between shareholders increases gradually. But whether the two parties will break up, there is no further news at present.
The rise of foreign investment
The appearance of the contradictions between Shanghai and Shanghai's Michelin shareholders has already spread in the foreign tire industry. Affected by this, this year foreign tire giants have shown the idea of ​​evading joint ventures with professional tire factories in joint ventures with domestic companies.
On November 27, the Pirelli Group established a second factory in Shengzhou, Shandong Province, and officially put into production mid-to-high grade passenger car tires. This factory is jointly funded by Pirelli Group and Galaxy Group, of which Pirelli shares 75% of the shares. The Shandong plant will become Pirelli's production base in the East (Asia), and the future export ratio can reach 50%.
Choosing a joint venture with Shandong Yinhe Group, which is not a professional tire manufacturer, Pirelli’s intentions are also obvious. His chief executive, Francescos, even admitted that Pirelli does not need to find a fully professional or in-house joint venture to cooperate with us, so that if there are drawbacks, both parties will not make concessions.
In the early days, the world's three largest tire giants Michelin, Goodyear and Bridgestone have successively established joint ventures or wholly-owned companies in China. However, in the course of the development of the joint venture company, the giants gradually gained control of the joint venture company through equity conversion, or transformed into a sole proprietorship company.
At the end of 1995, Michelin established its first joint venture tire company in Shenyang. In 1997, Michelin added three joint venture companies. The four joint ventures completed the merger on January 1, 2002 and became a foreign company on August 1, 2003. Sole proprietorship.
In the Shanghai Michelin Warrior joint venture process, Michelin also tried to dilute the equity of Chinese shareholders through a capital increase plan.
In October of this year, the last of the top ten tire companies in the world that did not invest in China, the German brand tires, also signed an investment agreement in Hefei, Anhui, and there was no doubt that the brand tires in Malaysia were selected for sole proprietorship.
According to Ke Ruibai, general manager of Continental Horse Tyre Shanghai Co., Ltd., the new plant will start construction in mid-2008 and will be put into production in early 2010. After the project is expected to reach production capacity, 4.2 million tires for passenger cars will be produced annually. And in the case of meeting the Chinese market, the Hefei factory will also have export plans.
"We know that there are some joint venturers in the Chinese market that are both experts. Because both parties are experts, it is inevitable that there will be drawbacks." Francesco said, "We don't name this, but everyone should know."
In the struggle for the Chinese market, multinational companies have been constantly seeking to dominate the joint venture company, and even turned into a sole proprietorship. In the face of the strong financial strength and leading technology of multinational giants, the market share of domestic tire brands is also shrinking.
At present, the average production capacity of China's tire manufacturing enterprises is only 400,000/year, and there are only 15 large companies with a production capacity of 1 million/year and 3 companies with more than 3 million/year. According to statistics from China Rubber Industry Association, the six major self-owned brand products of this year, including Wanli, Triangle, Linglong, Luck, BCT, Haida, etc., accounted for only 25% of the country's total output and market coverage. The rest of the market share was owned by foreign brands. Carve up.