Michelin (China) Investment Co.'s sales have taken a hit from the slowdown in vehicle sales in China, according to Chairman Eric Jugier, but he is optimistic about the future.
``There are two different scenarios,'' he said. ``Today is a crisis and we will continue to see sales fall and not rebound for a couple of years, or this is just temporary. (But) we sell more tires in the retail market, and in both cases you see the replacement market size continuing to increase.''
After seeing 30-percent annual growth in previous years, Mr. Jugier said Michelin's sales growth for 2004 and the next several years probably will slow to around 10 percent.
Nonetheless, Michelin is forging ahead with its capacity expansion in the north China city of Shenyang, though Mr. Jugier declined to give specific numbers.
Michelin sells three brands of tires in China-Michelin, Warrior and BFGoodrich-which together equate to around 24 percent of the passenger tire replacement market in China, he said.
The Warrior brand name belongs to Shanghai Tire & Rubber Co. Ltd., China's largest passenger car tire maker. Michelin acquired a 70-percent stake in the company in March 2001, including rights to the Warrior name for passenger tires.
Michelin sells ``a few million'' tires a year in China, Mr. Jugier said. Michelin's business in China was less than 5 percent of the French tire maker's 2003 sales of $17.4 billion, but it is the fastest growing market in the world for Michelin.
That growth is due to the rapid expansion of China's automotive market. Total vehicle sales rose by 30 percent in 2003 over 2002, with passenger car sales up 70 percent to more than 2 million units, according to Automotive Resources Asia.
This year, growth began to slow in China's automotive sector in May due to a government measure aimed at cooling an overheating economy. But China's vehicle sales still will rise by nearly 20 percent this year, and next year should also see double-digit growth.
In the slower sales environment, Mr. Jugier is counting on a superior distribution system and better customer service to keep Michelin's business growing.
In 2002, Michelin began establishing branded retail outlets for tires in partnership with its retailers. The concept was novel in China's tire aftermarket.
The company has more than 1,000 outlets nationwide, including 145 ``premium'' TirePlus stores-a rank assigned those with the best locations, most advanced products and best facilities.