Double Coin is Weighing its Options
Double Coin Holdings Ltd. is proud of the five manufacturing facilities it operates in regions across China, including one joint venture project with Groupe Michelin.
But none of those tire factories protects Double Coin from what its chief executive says would be a disaster.
A tariff on truck tires.
“If it happens to TBR, that would be a catastrophe,” says Liu Xunfeng, chairman of the board of Shanghai Huayi Group Co., the company which holds 66% ownership control of Double Coin.
“We have spent almost 20 years cultivating (the American) market. We don’t want this to happen.”
Double Coin holds a 4% share of the U.S. replacement truck tire market, according to Modern Tire Dealer statistics — double its share from 2009.
Double Coin knows what a tariff can do to its business. The tariffs on off-the-road tires smaller than 39 inches prompted the company to stop shipping OTR tires to the U.S. in April. The duties on passenger and light truck tires from China are preventing Double Coin from bringing its Warrior line of consumer tires, built in Shanghai, to the U.S.
The risk of the U.S. Department of Commerce imposing tariffs on medium and heavy-duty truck tires is too much for Double Coin to blindly ignore. As a result, for the first time the China-based tire manufacturer is looking at the feasibility of building tires outside of its home country.
Xunfeng says the company is “only considering” the options, and that no decision has been made. Still, he mentions both Thailand and the U.S. as options, in part because the Huayi company has existing relationships with other manufacturers in each of those countries. Huayi makes and sells everything from paint and soap to batteries, and partners with companies such as 3M Co. and Chevron Corp. in other ventures.
The leaders of China Manufacturers Alliance LLC (CMA), a Double Coin subsidiary that markets the company’s tires in the U.S., are encouraging and supporting an American production facility. Mike Yang, president of CMA, says Thailand appeals to Chinese manufacturers because of its proximity. “It’s close to China. It’s easy for them to have control.”
But at the same time Aaron Murphy, CMA’s vice president, notes there’s unrest in the region, and a lack of widespread developed infrastructure, which makes shipping and logistics difficult. “They’re a good alternative if you have an anti-dumping tariff.”
A new facility could come in the form of a partnership with another tire manufacturer at an existing plant. During an interview in Shanghai, Xunfeng specifically mentions Goodyear Tire & Rubber Co. and Cooper Tire & Rubber Co. as possible partners, but other companies are possibilities, too. Such a partnership isn’t a new concept for Double Coin. Its Warrior line of tires is the result of a joint venture with Michelin. Double Coin owns 60% and Michelin owns 40%. The executive says Double Coin is focusing on a “win-win” strategy.
Xunfeng isn’t saying what tires a new plant outside of China would produce. “We’re not going into those details now.” But having a production site outside of China would allow Double Coin to do more than secure its truck tire business and OTR tire sales in America.
There’s no reason it couldn’t build passenger and light truck tires at the site as well. For now, all of the company’s production remains in China. But even there, Double Coin is making changes and planning for an expansion to produce an additional 1.5 million TBR tires a year.
The plant in Rugao, China, located three hours northwest of Double Coin’s headquarters in Shanghai, is becoming an especially important focus of the company’s manufacturing efforts. Production costs, including wages and utilities, are lower in Rugao compared to Shanghai, a city of 23 million people. As a result the company has moved some of its Shanghai production to Rugao.
By 2018 tire production is expected to hit 4.2 million TBR tires a year in Rugao, says Fan Xue Feng, deputy general manager of the Rugao facility. The growth will come with the addition of a low rolling resistance truck line, to be built in a facility immediately behind the existing Rugao factory, which already produces 2.7 million TBR tires and 100,000 OTR tires a year.
A second mixing facility already has been built and is in use, Feng says. The expansion represents a 1.5 billion yuan investment, or $234 million, when converting the currency the day of Modern Tire Dealer’s visit, Aug. 27, 2015. ■