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Featured, Tyre Industry

he Shanty Chadda Diaries: My Pilgrimage To Mecca Of Tyres.

Posted: January 12, 2016 at 10:39 am   /   by   /   comments (0)

As I looked up from my plate, he had passed out. The person sitting across me on a big revolving Chinese lunch table had perhaps taken too much of Guizhou (a Chinese liquor) in the company of the owner of the tyre factory, where I was also invited, and clearly he was made of lesser stuff than the rest of the gentlemen on the table. As I watched him fixated, others were carrying on with their round of drinking. He laid motionless and lumpy on his chair. Honestly, I was worried. However people around me went about chattering oblivious to the person on the chair. May be they were used to such petty incidents in an official get together. In India, in my daddy’s tyre dealer circle, drinking binge is also common especially when invited by a tyre company to its dealer meet. Scotch is free and tyre company’s managers are very generous especially if the meet is timed at the end of the quarter. Of all the things that I enjoy in my daddy’s tyre trade this is something I particularly like and appreciate. At home, scotch is reserved for special occasions but in such dealer’s meet, as they say, I complete my quota. Apart from free liquor, I also get to meet interesting characters which I can easily weave into my stories. In such dealer events, scotch flows freely but ” mind you ” no one slumps on the chair. They after 3-4 pegs, as they call in Delhi, “get out”. “Getting out” is a typical phrase which a Dilli Wala can only understand. Getting out means starting a tirade of “be….d” and ” m…..d”. It is definitely much more macho then just slumping in the chair.
Well coming back to the Chinese lunch, the atmosphere was festive with people regularly toasting two Spanish ladies who were there to sell their products to the tyre company. Suddenly everyone was going ga ga over Spain and its football. I was in a tyre company based in Da Wang village in a town called Guangrao. I was on pilgrimage to the city to pay respect to the trade which had allowed me to have access to a nice education in a public school which in India is reserved for a privileged lot. For my father, I was there to look for opportunities to import. These days, TBR tyres from China are being imported into India with impunity and my father wants me to explore different options available. Well for the people who are not from the tyre industry, I am sure that names like Da Wang or Guangrao will not ring a bell. The place is not on a tourist itinerary as it has done nothing in the past to earn a mention in history. However, it is Mecca of tyre industry in China, may be for the entire world. As a part time writer wanting to travel and alongside trying to fit into my daddy’s tyre business, I had to be here to know about the place I had only heard about in scratches. No one in India seems to be in a position to give me any detailed description of this place except that you get cheap tyres from here. May be even if they were aware about it, I know from my experience they will not tell. Tyre trade people in India for the reasons best known to them tend to be very secretive. About this trait we will keep it for discussions for some other day. Now back to Guangrao. The lunch lasted for two good hours. As the Chinese men around me lunched and joked I tried to keep myself busy by digging into prawns, fish and donkey meat which revolved around the table. Nobody expected me to contribute or look interested. It gave me enough time to be observant while having my meal.
One cannot talk about the Chinese tyre industry without mentioning Guangrao. It represents the grit and determination of Chinese entrepreneurs and their extreme risk taking capabilities which has made this place a must go for anyone wanting to source tyres from China. Da Wang also commonly referred to as “The Tyre Village” is not very far from Dongying city in Shandong province of China. World over Guagrao town with places like Da Wang has been source of cheap tyres which get exported to USA, South Africa, Rest of Africa, Middle East, Russia and of course India too. The small town boasts of a comprehensive eco system for manufacturing tyres. Tyre factories are lined next to each other and the sky is permanently grey due to smoke emanating from the factories. While driving around one constantly moves from an area which emanates chemical stench to the one which has a smoky stench. One tends to breathe short with false assumption of taking less of the chemicals from the surroundings. Ladies on their scooty’s can be seen driving with their mask on whereas, strangely, the men do not like to wear a one – may be due to false pride that their lungs can bear more of the foul air than ladies. As I finished my lunch I saw the person who had slumped back on his feet. I was relieved. I walked across to him to congratulate him for being alive and learnt that he is a tyre distributor for local region for the company. After exchanging my cards with him I moved out.
The other tyre plant was just next door. I took a walk instead of getting into the car. As I walked in, on the entry itself I saw tyres in a dust laden showcase which clearly no one has bothered to attend to for months. As I was ushered into the room of the person I was supposed to meet, I looked around. There was a broom along with a wiper resting against the wall but the floor was still dirty. There were maps on the wall. Looking closer all the maps were same. Probably the person putting a new one has not bothered to remove the older ones. I was served Chinese tea elaborately prepared in the Chinese style. Talks soon veered around the desperate situation existing in the area. It was clear that Mecca of tyre industry was going through the trying times.
Tyre Companies like Heng FENG, Yongtai, Huasheng, Woosen, Huger rubber etc. have their plants here. Total of about 90 tyre companies operate from this region making it clearly a global power house for tyres. One can imagine the magnitude of tyre production if you consider that India as a whole has only 60 tyre plants. The tyre industry here has been fuelled by cheap land, cheaper loans, Government incentives and a work force which does not mind working overtime. With port like Qingdao only 3 hours away it has allowed tyre plants here to export to all parts of world. Tyre companies operating from here treat tyres like commodity and as a strategy do not spend money on building their brands. The money rather goes in making their tyres more affordable and competitive. This place acts as a magnet for companies owning and marketing their private brands in USA and Europe. Tyre companies over here welcome such business proposals and their whole manufacturing set up has been tailor made to suit requirements of such private brand companies whom they refer to as “OE business”. Overseas distributors, private brand owners and wholesalers love the flexibility, options and speed of tyre development which this region offers. Most of the sizes and pattern options are available off the shelf and if they are not available the patterns can be designed and moulds made in a matter of days. Compare this with scenario in India where such business proposals are scoffed upon and asking Indian Tyre Company to manufacture a private brand may result in protracted negotiations which ends up being a huge deterrent for private tyre brand owners.
Drive around Guangrao and one will find hoardings only of tyres and nothing else. The road signs also mark tyre plants with their phone numbers mentioned therein. Over the years, factories which supply raw material to the tyre industry have also mushroomed making it JIT deliveries of raw material for Tyre plants and cutting down on their investments in the raw material costs. Just imagine almost 70% of the populace of the city trained in some sort of a skill set required by the tyre industry and one can literally hire a person for the tyre plant walking on the street.
Sitting in a nice cafe, dishing out great coffee and cakes, I was even tempted to ask the waiter if he too had some tyre plant work experience. I am sure if he did not, but then, someone in his family would definitely be involved.
However, the Guangrao of today does not seem to be in the pink of health. It was building for some time but the cookie started to crumble when USA imposed anti- dumping duty on import of tyres from China. This has not only hit the business but the sentiments too. However Industry people here feel that USA anti- dumping action is only an excuse and this was waiting to happen. Tyre companies are now running out of cash and banks are no longer benevolent in roll over of the loans. Local government which was once been so supportive of the tyre industry growth now wants some sort of consolidation to happen. Tyre companies are running into losses and everyone is losing. Government feels that, in the longer run, closing of few factories will be beneficial for whole of the tyre industry in this region.
Another reason for such a state of affairs has to be mindless expansion of tyre capacities. No thought of demand forecast had gone behind capacity expansions which have taken place. Now the tyre companies are sitting over brand new plants which are waiting for orders to come. If a tyre plant is working at 50% capacity it can count itself to be lucky as it is still much better than the rest. To compound the matter, the tyre plant bosses have developed extravagant lifestyle. They have invested in luxury cars and costly apartments. Moving around tyre factories and also on roads I did see lot of BMW’s, Audi’s and Mercs on the street. Quite a few of the tyre plant owners instead of putting money in their tyre business have gone ahead and invested in real estate , chemical and other tyre allied industries depleting critical cash flows of their companies.
Deriubo tyres have already closed down and while this piece is being typed HENGFENG tyres is in negotiations with Wosheng tires for taking over. Some say that deal has already been done and it’s just waiting to be announced. Suddenly there are lot of people who now are saying that they can act as agents and help some foreign company take over a tyre plant in the area. When asked which one, the reply is that there are quite a few in line and one can make a choice.
Walk into a tyre factory one can notice derelict buildings, pitiable working conditions and dust laden show cases. Suppliers can be seen meandering around the halls waiting for payments to be made. Suppliers to these tyre factories says that sales are easy and it’s only collection of payments which is difficult. Best way to get paid is to just hang around and be seen.
After 5.30 its gets dark in the tyre factories. This is very different from Indian tyre plants which keep on chugging and are brightly lit even in the night with workers working in the night shifts. Most of the plants here are no longer running night shifts and darkness prevails in the area when the evening descends.
Does that mean an end to this excellent tyre industry eco system ? Not really. Consolidation which has once started is expected to continue for another two years. It will end up killing some weaklings but the strong ones will emerge stronger. Chinese government is also keeping a close watch on the situation and am sure will be calibrating the whole process behind the scenes. For the tyre industry worldwide it is also a matter of respite as moving ahead they will have lesser desperate tyre companies wanting to sell at mind numbing prices.
Meanwhile for people of my ilk back in India these are good times. We have cheaper tyres to sell and are perhaps been singularly instrumental is bringing down TBB market in India faster than what tyre companies back in India would have imagined. I understand that TBR imports have now touched 1, 40,000 tyres per month up from 40,000 a month about 6 months ago. That is quite a figure.
I am now headed for dinner and another bout of drinking session. I have been advised to refrain from drinking as I cannot match Chinese capacity. Well let’s see whether Punjabi body system can match up to Chinese or not. Will keep you posted.
– Shanty Chadda Tyrewala.

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