GUIYANG, China — Guizhou Tyre Co. Ltd. has scrapped plans to build a truck/bus tire plant in China and instead will redirect some of the project's funding to an ongoing expansion of OTR tire capacity at its factory near Guiyang, Guizhou Province.
Guizhou, which goes to market internationally under the Advance and Samson brands, cited increased market supply of commercial tires over recent years and the subsequent decline in profit potential from said tires.
Guizhou disclosed the truck/bus tire project in late 2019, budgeting $310 million for a 1.77 million-sq.-ft. factory capable of producing up to 3 million tires a year. The plant also was designed to have capacity for "giant engineering" tires.
In statement on Jan. 10, Guizhou said it is terminating the fund-raising process for the project and redirecting funds raised to date to an ongoing $273 million project to set up an "intelligent manufacturing" OTR tire plant in Zhazuo Town, Guiyang, that is slated to produce 380,000 engineering tires per year.
"In recent years, enterprises have increased production capacity of all-steel radial truck tires, and the market competition has become increasingly fierce," Guizhou said in a filing on the Shenzhen Stock Exchange.
The company went on to explain that, with rising costs, both its TBR capacity utilization rates and gross profit margins for the tires had significantly decreased.
On the other hand, Guizhou noted the construction machinery industry "has entered a new round of rising cycle since 2017."
According to Guizhou, capacity utilization rates of the company's all-steel OTR tire products remained above 95% throughout 2021 and 2022, and profit margins of the product are also higher than that of all-steel radial truck tires.
Guizhou Tyre is represented in North America by North American Commercial Tire Resources Inc. — formerly GTC North America/Great Lakes Tire — in North Canton, Ohio
— By Shahrzad Pourriahi, ERJ Staff, with additional reporting by Tire Business staff