Orient Securities released a research report stating that Chinese domestic tire manufacturers, under the heavy pressure of tariffs, are choosing to move production capacity overseas to countries like those in Southeast Asia. However, as exports from Thailand and Vietnam grow, anti-dumping investigations by multiple regions including the United States and the Eurasian Economic Union against Southeast Asian countries continue, potentially diminishing the advantage of low tax rates. Diversified global production capacity layout has become a core prerequisite for tire companies to maintain survival and profitability. Domestic tire brands maintain a significant terminal price advantage, offering clear cost-effectiveness even under high tariffs. The firm favors leading tire companies with multiple overseas production bases, which can flexibly respond to changes in global tariff policies. The main points from Orient Securities are as follows:
Anti-dumping and countervailing duties have become normalized, putting pressure on domestic exports and making overseas capacity relocation a necessity. Since 2007, the United States has initiated multiple rounds of high anti-dumping and countervailing duty investigations and periodic reviews against Chinese domestic tires, leading to a significant decline in Chinese tire exports to the U.S. The demand gap in the American market shifted to regions like Southeast Asia. The 2026 sunset review of U.S. passenger vehicle tires further strengthens tariff barriers. In the next five years, Chinese manufacturers may face combined anti-dumping duties of 14.35%-87.99% and countervailing duties of 20.73%-100.77%, with a maximum total rate reaching 188.76%, effectively blocking direct exports from China to the U.S. The EU has intensified its "dual anti" policies against China, proposing to levy anti-dumping duties of up to 51.6%, resulting in a sharp decline in EU imports of Chinese passenger vehicle tires. Trade policies in Brazil, Peru, and Russia are tightening, continuously raising regional market barriers. Chinese domestic tire manufacturers, under tariff pressure, are opting to relocate capacity to Southeast Asian countries. However, with the growth of exports from Thailand and Vietnam, anti-dumping investigations by multiple regions including the U.S. and the Eurasian Economic Union against Southeast Asian nations persist, which may erode the low-tax advantage.
The U.S. Section 232 tariffs indiscriminately impact global tires. The Section 232 measure imposes an additional 25% tariff on all tire imports globally, increasing the cost for global tire exports to North America. This has put pressure on the profitability indicators of leading domestic Chinese tire companies, with sales gross margin and net profit margin experiencing periodic declines. The tightening of rules of origin reviews under the USMCA agreement is prompting tire companies to establish full industrial chain, asset-heavy localized operations in Mexico. With global tariff barriers rising comprehensively, Chinese tire export capacity faces pressure. A diversified global production capacity layout has become the core prerequisite for tire companies to sustain survival and profitability.
Under heavy tariff pressure, domestic tire companies are actively breaking through the situation. The cost-effectiveness of domestic tires remains strong: Even with the addition of punitive tariffs like "dual anti" duties and Section 232 tariffs, the terminal retail price of Chinese brand tires in the U.S. is only 40%-50% of that of international first-tier brands and lower than second-tier brands. Domestic tires maintain a prominent terminal price advantage, with significant cost-effectiveness under high tariffs. Tire manufacturers only bear a portion of the tariff costs, demonstrating resilient profitability: The high tariffs are not fully borne by the companies. The net profit margins of overseas factories for domestic Chinese tire companies generally remain high, and profitability has not been significantly impacted so far. Overseas bases show strong profit resilience and possess sustained risk resistance capabilities.
Multiple overseas base layouts: Relocating capacity to emerging countries such as Indonesia, Mexico, Morocco, and Serbia still offers clear comprehensive tax rate advantages. Leading domestic tire companies with sufficient overseas capacity and diversified international bases are expected to maintain resilience amid escalating trade conflicts. Leading companies like Sailun Tire, Zhongce Rubber, Linglong Tire, and Sentury Tire have achieved significant results in their global layouts. By dispersing risks and transferring orders across multiple bases in Southeast Asia, Europe, America, and Africa, the profitability of their overseas factories remains resilient.
Related companies: Sailun Tire (601058.SH, Not Rated), Zhongce Rubber (603049.SH, Not Rated), Sentury Tire (002984.SZ, Not Rated), Linglong Tire (601966.SH, Buy), Guizhou Tire (000589.SZ, Not Rated).
Risk warnings: Continued intensification of trade conflicts, overseas projects falling short of expectations, continued severe fluctuations in raw material prices, decline in tire demand.