'We are here to stay': Hangzhou Zhongce invests in R&D expansion and new HQ
Already purportedly the largest tyre manufacturer based in China (with annual turnover equating to around US$3.38 billion in 2010) and currently number 11 in the world, Hangzhou Zhongce reports that it expects to climb up the rankings following the opening of a new factory during the middle of next year.
In the medium term the ambition (something that Chinese manufacturers are seldom short of) is for the company to maintain a top 10, perhaps ninth, and beyond. Although this could mean leap-frogging other fast-growing Far Eastern competitors (including the increasingly influential Korean set), during a recent meeting in London with executives and research and development heads Hanzhou Zhongce representatives reiterated their intentions of becoming world-class players, inviting partners to “craft a better future” through the Chinese tyre maker's Westlake brand. The CEO of the Westlake brand, who reports directly to the president of Hangzhou Zhongce and who was introduced as Mr. Ge, was in attendance.
The sprawling complex of Hangzhou Zhongce’s tyre production facilities already spreads out across nine factories around the city of Hangzhou (Zhejiang Province, Eastern China). Prior to the completion of the new factory next year, Hangzhou Zhongce plans to increase truck tyre production 15.73 per cent to 10.3 million tyres. Passenger car tyre production is set to increase by more than 27.98 per cent to 23.1 million. In addition the company produces increasing numbers of OTR and industrial tyres (the firm reports it is the number three solid tyre manufacturer in China) and a huge amount motorcycle and bike tyres each year.
While the production of passenger car tyres is growing fastest at the moment, looking forward, company representatives explained that the firm is particularly interested in increasing truck tyre output. Of course, all of this is set against the hostile input cost environment that all tyre makers have been forced to cope with over the last few years – something that makes both initial tyre production and the process of passing on cost increases to customers and consumers that bit more difficult. In response Westlake reports that it has been tracking these prices and (following a short-term price dip in February, which returned to virtually the previous level in March) predicts the peak time for demand and therefore costs to be around April/May. Product price increases are therefore likely, but as well as giving advance warning the company is seeking to stabilise the prices for its customers throughout the rest of the year, something that is less common in China than it is in the West.
Research and development investments
Hangzhou Zhongce’s Westlake tyres are produced in a temperature and humidity controlled environment, again something that is not commonplace in Chinese tyre factories.
Recently the firm invested [around £30 million] in purchasing a number of one-stage tyre building machines. While some factories may invest in one or two of these, Hanzhou committed to both the technology and the concept by buying ten in one go, along with ASTEC uniformity testers running on both its passenger and truck tyre production lines. The latter investment allows the company test and control the uniformity of 100 per cent of its output. The firm also owns German manufactured x-ray testing equipment across both its truck and passenger car tyre production lines.
With Reach legislation compliance in mind, the company also invested in VMI Holland-produced tread wear analysis equipment and systems that analyse the properties of raw materials and vulcanised rubber.
Then there is the MTS Flac-Trac III machine that, while still less than commonplace, has become the weapon of choice for manufacturers from Michelin to Hankook, Giti and now Hangzhou Zhongce when it comes to increasing tyre performance by beating down the rolling resistance characteristics of tyres.
In addition Hangzhou Zhongce told Tyres & Accessories that it has access to China’s first an-echoic chamber designed for testing tyre noise. This not only gave the firm a head start on s-marking compliance, but also helps when it comes to the 2012 labelling legislation’s noise requirements.
According to the company, Hangzhou Zhongce started working on 2012 labelling legislation in the first quarter of 2010. Since then the company is said to have invested more than £10 million on the passenger car tyre segment compliance alone. In addition to the theoretical work conducted on the above machinery, product development engineers also say they have conducted road tests in Germany and Holland along with some OE testing courtesy of VW China. Other track-based tests carried out include ISO noise testing, wet-grip evaluation. One direct fruit of all the testing is said to have been the attaining of a between 4 and 5 decibel reduction on tyre noise compared with the company’s previous generation of passenger car tyres.
In addition, Hangzhou representatives say they have been hiring award-winning technical personnel with experience of working for some of best-known leading international tyre manufacturers. While reports of Chinese tyre manufacturers’ rapid expansion and latterly investment in research and development are not new, something many in the industry are less aware of is that the firm’s off-take portfolio includes contracts producing tyre brands for manufacturers such as Goodyear, Yokohama, Kumho and Cooper. Apart from the kudos associated with working with higher profile manufacturers, these deals are said to bring a certain degree of technological exchange with them as well.