Orient: China's leading tire company actively breaks through and is optimistic about overseas production capacity layout companies.

Orient's research report states that under heavy tariff pressure, Chinese local tire manufacturing companies are choosing to expand their production capacity overseas to countries in Southeast Asia. As Thailand, Vietnam, and other countries see an increase in exports, the United States, the Eurasian Economic Union, and other regions continue to conduct anti-dumping investigations on Southeast Asian countries, potentially reducing the advantage of low tax rates. Diversifying global production capacity has become a core prerequisite for tire companies to maintain survival and profitability. Chinese-made tires have a prominent price advantage at the end market, with cost-effectiveness still significant under high tariffs. The industry sees potential in establishing multiple overseas production points to flexibly respond to changes in global tariff policies. Key points from Orient's report are as follows: Normalization of anti-dumping measures poses pressure on local tire exports, necessitating production capacity expansion overseas Since 2007, the United States has initiated multiple rounds of high anti-dumping and countervailing duty investigations on Chinese-made tires, leading to a significant decline in tire exports from China to the US. As a result, the demand gap in the US market has shifted to Southeast Asia and other regions. The Sunset Review of Semi-Steel Tires in the US in 2026 further reinforces tariff barriers, potentially subjecting Chinese manufacturers to anti-dumping duties of 14.35%-87.99% and countervailing duties of 20.73%-100.77%, with a combined maximum rate of 188.76%, effectively blocking direct exports from China to the US. The EU has intensified its "double reverse" policies towards Chinese-made tires, proposing to impose a maximum anti-dumping duty of 51.6%, leading to a significant decrease in the import of semi-steel tires from China. Brazil, Peru, and Russia have tightened their trade policies, raising regional market barriers. Under heavy tariff pressure, Chinese local tire manufacturers are choosing to expand production capacity to countries in Southeast Asia, with increasing exports to Thailand, Vietnam, and other locations. Anti-dumping investigations from the US, the Eurasian Economic Union, and other regions continue on Southeast Asian countries, potentially diminishing the advantage of low tax rates. Section 232 tariffs impact global tire market indiscriminately Section 232 tariffs impose a 25% tariff on global tire imports, leading to increased costs for tire exports to North America. Top domestic tire companies face pressure on profit indicators, with a temporary decline in gross profit margins and net profit margins. Tightening rules on the origin of goods in the US-Mexico-Canada Agreement have prompted tire companies to localize their entire production chain in Mexico with heavy asset investment. Overall, global tariff barriers are rising, putting pressure on Chinese tire exports, making diversified global production capacity a core prerequisite for tire companies to maintain survival and profitability. Under heavy tariff pressure, Chinese tire manufacturers actively seek breakthroughs The cost-effectiveness of Chinese-made tires remains strong, with Chinese brands selling at only 40%-50% of the retail price of international top-tier brands in the US, lower than second-tier brands. Despite punitive tariffs like anti-dumping measures and Section 232, Chinese-made tires maintain a significant price advantage at the end market. Tire companies only share a portion of the tariffs, maintaining their profit-making resilience. Overseas net profit margins of Chinese tire companies remain high, with overseas factories showing strong profit-making resilience that can withstand risks. Multiple overseas production bases, including emerging countries like Indonesia, Mexico, Morocco, and Serbia, still have clear comprehensive tax advantages. Leading Chinese tire companies like Sailun Group, Zhongce Rubber Group, Shandong Linglong Tyre, and Qingdao Sentury Tire have effectively expanded their global presence, diversifying risks through multiple bases in Southeast Asia, Europe, the Americas, and Africa, shifting orders to maintain profit-making resilience of their overseas factories. Listed companies discussed in the report are: Sailun Group (601058.SH, unrated), Zhongce Rubber Group (603049.SH, unrated), Qingdao Sentury Tire (002984.SZ, unrated), Shandong Linglong Tyre (601966.SH, Buy), GuiZhou Tyre (000589.SZ, unrated). Risk Warnings: Intensification of trade conflicts, underperformance of overseas projects, continued severe fluctuations in raw material prices, and a decline in tire demand.