Giti Tire leverages South Carolina plant for growth

In our Mid-Year Q&A, Kenny Lee, vice president of sales, consumer tire sales for Giti Tire USA, talks about a challenging market and how the company is focused on the growing CUV and all-weather tire segments.

We had hoped the "post-pandemic recovery" would continue. However, with mixed messages about economic stability and the jobless numbers, the return to commuting is still below expectations. Since miles driven is a key indicator of market status, we should be relatively on par with 2022. The first half has been a little lower in miles driven, yet more people appear to be ready to hit the road.

The continued impact of overall inflation and the threat of recession could have an even more negative impact on American consumption and travel habits down the road.

On national levels, it appears that several segments — Passenger/CUV (Ultra Touring and some UHP) and Passenger/Light Truck and LT Type (All-Terrain primarily, and RT and some MT) categories are recovering faster than others.

Some consumers appear to have taken a step lower in the price levels by one step.

A good way for dealers to judge their local market trends is to examine the vehicles that are being driven and the amount of traffic – this can be a good rule of thumb for stocking levels and which types of tires to stock.

We have witnessed little to no effect on U.S. business due to the Ukrainian war other than the price of fuel for a period, which tends to restrict miles driven.

Inflation adds a doubling effect on the reduction of miles driven, as well as increased distribution and product costs. The combination of all these factors tends to reduce the sell-in.

Sell-out appears to be faster in lower priced products due to inflationary impacts on disposable income and fears of hard times looming. However, the one thing about tire sales is that tires are eventually going to wear out and must be replaced.

Ports are flowing, transportation is there. If anything, the issues are with too much inventory in limbo due to the whiplash effect of 2021 and 2022 ordering on top of ordering trying to ensure stock availability; then once it all arrived, distributors and retailers' systems were overwhelmed. That, coupled with a shift from commuter driving to escapism, caused a shift in sizes and category needed. The challenge for dealers is, as always, having the right inventory at easy access when the consumer wants or needs a particular tire.

Everything is a bit more expensive, period.

Because of the factors with the economy, supply chains and regulations facing the industry, the prices of tires will inevitably go up at each level of the supply chain.

Our EV strategy is to immediately ensure that our customers understand that our current tire lines are "EV Ready." What this means for consumers is that they can be assured our tires are compatible with their EV vehicles. There are always trade-offs between OEM tires and replacement tires; mainly the trade-off is mpg (internal-combustion engine vehicles) and range (EV) vs. treadwear. In the future we will consider specialized tires that are made specifically for the EV vehicles with a unique value proposition.

The industry is moving forward at an impressive pace in technologies. For Giti, I am thrilled with our latest products developed just prior to and through the pandemic, and our success in moving forward with the South Carolina production facility delayed by the pandemic.

It is thrilling to take a drive and find more and more of the public hitting the highways, and even more returning to the workplace, as those are signals of miles driven rebuilding to levels found prior to the pandemic.

The mergers and acquisitions should help "balance" the inventory levels and smooth the inventory flow to the right locations in a timely manner. All good things. So, I would say "guarded optimism" would apply.

One trend that has been growing for years now is the all-weather segment. All-weather tires fill in the space between all-season tires and pure winter tires. They do this by providing a tire that can achieve the 3-Peak Mountain Snowflake (3PMS) rating which had historically been applied to winter tires. The value proposition for the U.S. market is a tire that provides enhanced all season performance with many of the positive aspects of current all-season tires, like better wet and treadwear performance compared to pure winter tires. We have developed new lines for the all-weather market. We will be officially announcing the launch dates of these new lines shortly.

By extension of the all-weather market for touring tires, there is also an expectation that all new AT tires come with a 3PMS rating. We have been developing all new AT lines to have 3PMS ratings for years, with our latest generation Adventuro ATX having it since it was launched.

Another trend is an ever-growing rugged-terrain (RT) segment. RT tires find their niche between traditional AT and MT segments. These tires provide the aggressive styling of MT tires with on-road manners closer to traditional AT tires. The RT segment is taking share from the MT market as more consumers realize they don't need the overly aggressive patterns for most of their off-road adventures. Again, we have developed new lines for the RT market and will be announcing the launches in 2024.

We also see more adaptation of AT fitments on traditionally on-road vehicles that are looking for a more aggressive appearance as well as some off-road capability for camping and other off-road adventures. Vehicles like the Outback, CR-V and Rav-4 are examples. We will be extending our lines in these popular sizes.

Of course, the increase to larger rim diameters continues to march on. We are very focused on making sure we keep up with this trend as we continue to develop new and emerging sizes. At our plant in South Carolina, we have the capability to make up to 24-inch rim diameters.

The real growth will be in the new market trends that we previously discussed. We have addressed that with new lines that were, like all of our new products, developed in the North American R&D center. The new lines will offer progressive new styling that is completely in tune with our market.

Additional growth opportunities will be in the CUV sizes. Our lines are designed as single to fit the entire spectrum of sedans and CUVs. The application is the same, as typically they are on the same platforms and therefore consolidating into a single line benefits our dealers, our customers and our own internal processes.

We will focus in the coming months on making more of the premium products and sizes the U.S. market is demanding at our Richburg plant, including the MaxTour LX, Adventuro HT and Adventuro ATX lines. The sizes in most demand are the 18-, 19- and 20-inch rim diameter sizes, but there will also be some key 17-inch sizes moving to U.S. production.

There are technological constraints between wet performance, treadwear and rolling resistance that limit all manufacturers. Think of it like a triangle and when you pull on one corner to make improvements, the other 2 areas are decreased. Scientific advances continue to expand the base triangle over time, but the real game changer would be the ability to increase each trait independent of the others.

The biggest game changer, but probably not in the near term, is a non-pneumatic tire; if and when several things occur. First, it must perform like a standard tire. Secondly, it must exist within the current set of industry standards, which ideally would mean it could be mounted on a standard rim and not a specialized tire/rim assembly which will require too many SKUs for dealers.

For many years, Giti has been working with Conservation International (CI) in conducting a protection program to preserve forest and biodiversity in Sumatra, India, and the southwestern mountains of China. The program has helped to purify carbon emissions that are equivalent to what Giti Tire produces in 100 years. In addition, CI and Giti are cooperating in freshwater and seawater protection, reforestation planting, and the prevention of zoonotic diseases.

At the 21st United Nations Climate Giti responded to the activity centering on "the shared responsibility for climate change," organized by the International Chamber of Commerce (ICC) to spread the idea of environmental protection.

Clean and reduced energy usage are a priority of Giti Tire. A large number of recent initiatives to incorporate this include installation of solar panels, air emission treatment, reduced energy LED lighting, nitrogen recovery systems, and improved automation, among others.

In terms of production and supply chain, Giti is dedicated to working with responsible and environmentally focused partners, utilizing clean processes, and continued dialog, review, and continuous improvement towards improving conditions.

Giti has a strong, long-term commitment to the U.S. market as evidenced by our continuing investment in our South Carolina plant, which is one of the most advanced passenger/LT tire manufacturing facilities worldwide. The Richburg facility is currently designed to produce five million tires per year for the North American market. It is a fully integrated, highly automated plant with state-of-the-art equipment covering the complete manufacturing process from mixing through final inspection.

Every tire rolling out of the Richburg plant has "Made in USA" prominently displayed on the sidewall, a source of great pride for our plant employees and a good selling point for our dealers.

Having our R&D Center on the plant site in South Carolina is a huge advantage in developing and producing the right products for the North American market. The advantages of close coordination between our R&D and manufacturing folks cannot be under-stated. As a global tiremaker, our goal, simply stated, is to provide the right tires at the right time for our dealers.