(Yicai) Sept. 27 -- Chinese tire manufacturers are stepping up efforts to expand output abroad, with the primary focus on Southeast Asia where more than a dozen, including Jiangsu General Science Technology and Shandong Linglong Tire, have set up factories already or have proposed to beef up production.

Building plants in member countries of the Association of Southeast Asian Nations offers benefits such as lower tax and better control of raw material, labor, and energy costs along with equipment depreciation, said Bian Yabo, secretary of the board at Wuxi-based General Science.

But demand and supply chains in the countries where overseas plants are built also need to be taken into consideration, Bian noted.

General Science’s Cambodia plant, which became operational in May, has begun mass-production and is expected to generate annual revenue of USD350 million for the firm, while creating more than 1,600 local jobs and driving the coordinated development of the local industry along the supply chain, including rubber and auto parts, Bian said. 

General Science’s plant in Thailand, working since 2020, has become a key source of income for its Chinese parent company, Bian said. It made a net profit of CNY196 million (USD26.8 million) in the first half of the year, up over 40 percent from a year earlier.

With the success of its first Thai plant, General Science announced on Aug. 28 that it plans to hike its capacity to produce high-performance radial tires in the country at a cost of CNY1.9 billion (USD200.6 million). The new plant is expected to be up and running within 24 months.

Chinese tire makers are building up overseas production capacity because high inflation in the United States and Europe is making high-quality Chinese brand tires more price competitive in overseas markets, prompting many European and US customers to switch to them, Bian said.

That is subsequently driving up exports of passenger car tires at a time when the Chinese market is tight because of strong demand for new energy vehicles, which is making capacity expansion overseas necessary, Bian explained.

Chinese producers of semi-steel tires for passenger cars saw their capacity utilization rate rise to 72.5 percent in the first 10 days of this month from 62.2 percent a year ago, according to data from Sublime China Information. The CUR of firms that turn out all-steel tires for commercial vehicles jumped to 64.4 percent from 53.6 percent. Meanwhile, domestic inventories are relatively low.

Editors: Tang Shihua, Futura Costaglione