Yves Chapot, president of Michelin (China), says growing car sales will help increase demand for tires in China. Provided to China Daily

Michelin, famed for its cuddly trademark figure, is expanding ITS operations in China

The French tire maker Michelin Group hopes to turn China into its biggest market by expanding its manufacturing capacity in the country and supplying tires for Chinese-made aircraft.

The company expects that the first tire of a factory in Shenyang, Liaoning province, being built at a total cost of $1.45 billion (1.18 million euros), will roll off the production line this year. The investment is the company's biggest in China.

The money being spent on the project is to relocate and extend the Shenyang factory to produce tires for cars and trucks. The project began in 2010 and construction will be complete in 2014.

The factory will then be able to produce 10 million passenger car tires and 1.8 million truck and bus tires a year.

Yves Chapot, president of Michelin (China) Investment Co Ltd, says the country's auto market will continue to grow because there are just 50 cars for every 1,000 inhabitants compared with more than 500 or 600 for every 1,000 inhabitants in Western Europe, North America and Japan.

"Tire sales will increase along with the sales of new cars, as well as the increasing vehicle ownership," Chapot says.

More cars are now produced and sold in China than anywhere else, and that has made a solid contribution to the country's growth over the past 10 years.

China, Russia and Brazil have become fast growing markets for carmakers such as Volkswagen, BMW, Mercedes-Benz, General Motors and Toyota.

In China car sales rose 5.2 percent last year. Solid demand for foreign brand vehicles helped the nation maintain its ranking as the world's top market, with total car sales of 14.5 million, about 2 million more than in the United States, according to the China Association of Automobile Manufacturers.

With personal wealth steadily growing and auto sales doing the same, the largest vehicle market in the world has attracted a number of foreign tire makers.

Apart from Michelin, Bridgestone Corp of Japan, Goodyear Tire and Rubber Co of the US and Continental AG of Germany are injecting big sums in China to expand their production.

"China's auto market experienced double-digit and even over 50 percent of annual growth rate in the past decade," Chapot says. "It is time for these cars, sold a few years ago, to have their tires changed. We expect the consumers' needs for high-performance tires to be even stronger in the next five years."

Michelin is not alone in Shenyang. BMW Brilliance Automotive opened a new plant there in May. BMW Group is investing a further 500 million euros in its Chinese partner Brilliance and plans eventually to increase production to 400,000 vehicles a year.

As Michelin vies to expand its share of the Chinese market, it has stepped up its cooperation with domestic partners. Michelin, Shanghai Huayi (Group) Co and Double Coin Holdings Ltd signed a joint-venture agreement last year under which they will produce and sell a new brand passenger car tire and light truck tire on the local market.

The new company, Double Coin Group (Anhui) Warrior Tires Co, is 40 percent owned by Michelin and 60 percent owned by its Chinese partners. Michelin is investing 85 million euros in the venture.

The plant is being built in Wuwei, Anhui province, about 400 kilometers from Shanghai. Representing total investment of 3.5 billion yuan ($549 million, 449 million euros), the project entails 15 million car and light truck tires being made each year.

"The outlook for 2012 is expected to improve, thanks to still robust automobile demand in lower-tier cities, which are catching up with major metropolitan areas as major growth engines," Chapot says.

Michelin has also been chosen to develop and supply tires for the C919, the first commercial airliner designed in China by Commercial Aircraft Corp of China Ltd. The contract grew out of an alliance created with the corporation in 2009.

"To comply with COMAC's requirements and selection process, we met a host of challenges, including respecting a tight development schedule, helping to lower aircraft operating costs, providing technical assistance in China and increasing production capacity in Asia," Chapot says.

The aircraft is expected to make its first flight in 2014 and to go into service in 2016. The aircraft, which will carry between 150 and 200 passengers, will initially be targeted at China's domestic market.

As for tires made for the road, Sun Fuquan, a researcher at the Chinese Academy of Science and Technology for Development, sees them as becoming increasingly important to Chinese motorists.

"Today, road safety and environmental protection have become a trend in Chinese society. Tires are playing a big role in this trend. A reliable high-quality tire cannot only help save fuel, lower emissions and save money, but can also save lives."

Chapot says: "That is why we think it is very important to keep on raising the awareness of consumers about safe driving. We are focusing on providing durable tires with precise handling response, high resistance against aquaplaning in wet conditions, the reduction of driving noise and rolling resistance."

Michelin has a distribution network in China with more than 6,400 dealers. Among them TyrePlus is said to be the first and largest auto service network with more than 730 outlets in more than 200 cities. In addition, Michelin has set up an extensive truck, bus and car tire sales service network, which includes more than 1,300 sales service centers and retailers for large-vehicle tires.

Sun says that all tire makers in China need to pay special attention to after-sales service because consumers have high expectations in that regard and sometimes struggle to find trusted service providers for their tires.

And companies with a large distribution network and with professional tire specialists will have a market edge, he says.

zhongnan@chinadaily.com.cn

(China Daily 07/20/2012 page21)