Marketing Gacosia Wheels in Shenzhen
Gacosia, owned by the Tsui brothers, has its headquarters in Hong Kong and a subsidiary in California. China Wheel produces Gacosia its alloy wheels, and in turn the manufacturer considers Gacosia as one of its two self-brands (the other being “Finn”). Stephen Tsui, Gacosia managing director, and his team, spend most of their time in China Wheel’s office space in Guangzhou: “We are very close partners,” he says. The relationship between the wheel brand and its manufacturer - and this is not uncommon in China - is not based on actual contractual agreements, as is the standard in the western countries. Instead it’s a case of “you scratch my back and I’ll scratch yours,” so to speak. So far Gacosia wheels have not been sold in Europe, whereas in China they are said to have the image of a “noble brand.” In Shenzhen Stephen Tsui presents two market outlets as being typical of Gacosia: CoolCheCool and the B&B Motor Club. The CoolCheCool shop is led by Henry Kong and looks like the combination of an accessories shop, a tyre dealer and a fast fit station. In any case business was active during Tyres & Accessories’ visit. Unlike a number of European markets, there are no seasonal high points in this part of China and no particular low point either. One customer would like a carwash, the next one air conditioning service, in one bay the mechanic works under the engine bonnet, in another the tyres are being changed, the next customer is looking for alloy wheels. The vehicles that come to the shop are the same as you might see arrive at your local tyre dealer and correspond to good European standards. Older cars are rather rare. This is “a completely normal business day,” observes Kong adding: “Our customers are interested in status symbols.” Thus he is interested in the sale of premium brands. Consequently Phillips, Shell and Denso products are offered to customers. As far as tyres are concerned, Goodyear is the preferred brand. Cheap names or unbranded products are frowned upon here. Nevertheless Kong would buy other products if required. When it comes to wheels he favours Gacosia products, and these are presented in the sales room as well as in the shop window accordingly. The wheels on show are predominantly large dimensioned casted aluminium wheels, which are often chrome plated. A few roads away, and still rather inconspicuous from the outside, the second sales point is called B&B Motor Club. This outlet is quite different to anything you might find in Europe: This is a garage attached to a first class restaurant and a bar serving fine French wines only the more expensive Cognacs. Venture on into one of the lounges and you will find the two Bs noted in the business’ name. B&B stands for BMW and Benz. “The business idea is oriented towards members of exclusive golf clubs,” says managing director Angie Cai, one of the few women in the largely patriarchal top management of Chinese enterprises. But the company does not only service Mercedes and BMWs. “For many members the Mercedes or BMW is the secondary car, and we also do not reject Porsche drivers.” That’s an understatement! The club areas offer all conceivable sources of entertainment, which naturally includes Internet connections. The focus really is on making the visit to a workshop as pleasant as possible. But with service like that don’t members come to the club whether their cars need servicing or not? The simple answer is yes they do. Whether the cars needs work or not, it is still carefully cleaned during the course of the stay. Across the road from B&B there is a small but high-class hotel exclusively for the use of club members. And it is on seeing this that you understand that it is really an exclusive club with sales rooms and workshops attached. Bearing in mind the competitiveness of the two companies in Europe, it is difficult to understand having both brands under the same roof. Cai just shrugs her shoulders as if to say: “What do we have to do with that?” B&B is a pilot project, employing approximately a hundred people. Cai let it slip that another 10 such enterprises are planned in other Chinese cities. The workshop is of the high quality you might expect having seen the top class eatery and bar. The equipment is largely from Europe (for example the site uses Maha lifts) and is completely new. The staff work extremely carefully on the equipment and even go as far as wearing white gloves! Cameras are directed towards the cars, so that their owners can see at any time, what is being done to their vehicle. When it comes to tyres B&B is limited to two brands - Pirelli and Continental. The wheels are of course premium Gacosia products. It is referred still to the fact that one co-operates naturally also with the large German tuners of the mentioned car brands, while on the screen famous racing drivers turns round and round. The high quality accessories are presented in a high-tech atmosphere, however, and not in the din of racing car motor, but accompanied by the ripple of a waterfall and classical music.
Continue ReadingFire Reported at Cooper Albany Plant
A fire at Cooper Tire’s Albany factory spread to the plant’s mixing machinery before firefighters were able to bring it under control, local news sources are reporting. According to WALB news, the fire broke out at 10:00am on Sunday 7 May. Cooper has its own in-house brigade to normally handle fires, but on this occasion the Albany Fire Department brought the fire under control. No injuries were reported and employees were able to return to work.
Continue ReadingThe Wheel Business is a Network…
The huge Republic of China is an automotive growth market par excellence. And that applies to the automobile manufacturers as well as their suppliers. The country is not only at the centre of low-price manufacturing for “the rest of the world,” but has also become an enormous sales market in its own right. The cluster of cities in the east of the country is home to millions upon millions of inhabitants and the streetscape is shaped by the sight of premium segment cars and their upper middle class owners. These cities also have well-developed road systems. Rush-hour traffic jams are another familiar sight for anyone used to driving in western metropolises – and that’s despite the numerous additional lanes alongside just as numerous skyscrapers. Today more than 7 million people live in Shenzen, for example. 20 years ago it was 30,000. These “drawing board” cities provide living space for people who no longer want to share and, in fact, are more likely to be in a position to impact the world economy. The Chinese aluminium wheel industry is relatively young because the automotive world is similarly young. It has developed in parallel with the Chinese automarket and so consequently has exploded, but this growth was also the intention of the ruling communist party. China Wheel is not a state enterprise, but rather belongs to the numerous businesses, which are either former state-run companies that have since been privatised or private sector businesses that were formed in capitalist countries. The owners are Patrick Tse (60 per cent, chairman) and his partner Derek Zhang (40 per cent, CEO). And the company is the sort of size that leads one to believe that the next step is to the stock exchange. The company is built upon a complicated network of participants each holding majority or minority shares, technical consultant Peter-Werner Frischkorn explains. He spends the majority of his time working in China for China Wheel, and has done so for years, and there are still many details of this arrangement that he is not privy to. China Wheel was involved in the Taiwanese wheel manufacturer FullChamp - a very small share, says Derek Zhang, from which XTRA Wheels (a recently formed German sales company) gets its exclusive forged wheels. “However all rights to distribute these wheels belong to us,” said China Wheels president, smiling. Only a few days later FullChamp also belonged to China Wheel. From zero to market power in half a decade China Wheel was founded by Patrick Tse (Xie Jianting in Chinese) and Derek Zhang (Zhang Xinying) in June 2001. Tse is without doubt a businessman. His focus is on ways of making as much money as possible in the shortest time, according to his employees, not to mention the man himself. Tse has been chairman of Huanan Motor Industry and also of the Huatian Group since 1994. Zhang is a wheel man through and through and his thinking revolves around wheels, wheels an more wheels. In 1989 he joined state-owned Zhongnan Aluminium Alloy Wheel. In 1998 he was appointed managing director of Nanjing Xinning Aluminum Wheel and had decided shortly after “to do his own thing.” The alliance of the “money man” Tse and the “wheel man” Zhang seems to have come at the right time and a visit to the stock exchange looks a likely course of action in the future. In addition to its core business China Wheel owns various “edge activities” including car dealerships and other non-wheel forging and casting operations. And the reason for the joint entry into the wheel business? Neither one had the money or the time to build-up their own factory alone, according to Zhang. But there must have been enough money, in order for them to buy several factories one after the other. Today the group owns three full-scale aluminium casting wheel plants and four chromium-plating factories. In 2005 the company’s manufacturing capacity totalled 2.6 million units annually, this is expected to rise to 3.5 million in 2006. Meanwhile its chromium plating capacity (based on US company Atotech’s technology) was 945,000 units across its four plants. At present China Wheel employs more than 2,000 people, 2,200 including administration and development staff (approximately 50 engineers). In terms of quantity this makes China Wheel the fourth biggest in China. As far as turnover is concerned, the enterprise is one of three fighting for second position (see Chinese market box). Overwhelming sales development In 2001 China Wheel turned over 3 million euros. The following year this increased tenfold, in 2003 it doubled again (reaching 60 million euro). By 2004 annual turnover was approximately 110 million euros, with as much as 150 million in 2005. Now Derek Zhang talks about entering a period of consolidation, but this certainly doesn’t mean that any expansion plans will be interrupted. Instead he is simply referring to the fact that doubling turnover within a year is no longer possible for the company. China Wheel is also quite profitable and about seven per cent of its turnover flows back into new technology and product development each year. And product development is something that happens at an almost incomprehensible rate. Since the establishment of the company, more than 1000 new wheel designs have been created, with nearly 3000 moulds. True, some of the designs can only be seen in North America and others have disappeared because it was decided they were too ‘playful’ even for there. But with a target of creating two new designs each day, some flops have to be expected. The difference to western companies, says PW Frischkorn, is that the decision makers do not have a long time to consider and examine each concept. If Zhang or one of his designers has a new idea promising only moderate success, then it proceeds to the next stage of development. At present China Wheel is the only Chinese wheel manufacturer capable of producing 26 or 28-inch wheels. In fact, the large wheel American Racing presented in 2003 (fitted with a Kumho tyre) was not manufactured by the Americans, but by its production partner China Wheel. Meanwhile the size record has since gone to a three-piece 10x30 inch wheel presented by Lexani/USA. However, this highly polished product has special chromium plating, which was built, according to our information in Taiwan and fitted with a Hankook tyre. However (large) size isn’t everything. China Wheel also makes 8-inch wheels for golf caddies. In either case, China Wheel has one target, to present itself as a premium manufacturer of premium products. The company has already succeeded to some extent in the US. Here the wheels it produces are not branded with its own name or one of the two house brands (Gacosia and Finn), but rather AR and/or American Racing, Dakota, Racing Motegi, Wheel Pros, Giovanna etc. The management has a different approach to other Chinese enterprises, the CEO stresses. His company sees further than price alone and also understands flexibility – an essential quality for an aftermarket-focused business – not to mention quality, without which the necessary reputation cannot be established. Derek Zhang can imagine similar alliances in Europe China Wheel already produces Momo brand wheels which were previously produced in Italy by Fomb. What works in America may also work in Europe using a similar off-take model. Why shouldn’t an established Italian or German sales company capitalise on the benefits of working with a quality producer like China Wheel? In America the door was wide open for China Wheel because the domestic aftermarket wheel manufacturers had very old-fashioned plants. In Europe Zhang recognizes that wheel manufacturers have shifted towards Eastern Europe, but he believes that the day will come when these locations will also prove not to be competitive. In this scenario the Chinese producers like China Wheel, Liufeng and others will have the upper hand. Zhang reports that his company is open to the possibility of making foreign acquisitions or entering into a joint-venture with a sales business, says European wheel manufacturers may also make interesting acquisitions. Company data implies that this could mean the acquisition of a company that is already active in the wheel business, if there was the right opportunity. Entering the OE business in the company’s existing form would not be the highest priority for Derek Zhang, something that is based on the fact that he sells the company’s current production levels without any problems in the US. China Wheel has a market share of more than 20 per cent in the US, according to Zhang’s estimates, because of the numerous brands that are produced in China. There is also sufficient demand for the further capacity that the company is planning. Zhang nevertheless brings up the subject of working OE production in partnership with another company “perhaps in three to five years.” Zhang recognizes the high standards in the original equipment field and is not interested in getting involved in a price war simply in order to increase his company’s OE market share. Currently 90 per cent of the wheels produced by China Wheel are exports to the US, with the remaining 10 per cent are divided between Europe, Japan, Australia and the Middle East. In terms of technology, China Wheel already has the same equipment that is used by others in the OE business. China Wheel has, for example, acquired casting automats and processing machines that were previously used by Opel, Skoda and other manufacturers, not to mention a modern Eisenmann painting plant, which was acquired within the framework of the Intra insolvency. The Intra signature can still be seen in parts of the Jiangmen factory today. The Jiangmen (Guangdong province) facility is currently China Wheel’s largest wheel factory. When Tyres & Accessories visited the site there were 32 casting automats at the factory that attracts the lion’s share of the company’s investments. 900 people live on-site, 700 of which work in the factory - some workers bring their families with them. The average age of employees is about 28. Many come from far-off provinces in order to return to their homeland village as well-respected men after years of factory work. Additional workforce is in no short supply. The pool of potential employees is enormous as jobs at the factory are considered to be highly desirable. The factory only produces AlSi7 alloy and the output was at the time of our visit (autumn 2005) was just-about 1 million units. Plans to extend this to1.5 million units are part of the company’s short-term investment programme. There is another expansion project at the Taian (Shandong province) site. This is set to bring the facilities capacity from 800.000 units (with 600 workers) up to 1.4 million units (with 1000 workers). Here, as at all its factories, the company produces exclusively using the low-pressure process using machines originating from Germany and Denmark. Partners Tse and Zhang started our with the Taian factory. The third wheel factory is in Tianmen (Hubei province), in which 450 employees produce 600,000 casted wheels annually. One production “bottleneck” here is in the painting side of the process. China Wheel owns four chrome plating factories (in Taian, Shandong province; Donghua, Donghui and Zengcheng all in Guangdong province) with an annual capacity of just under 1 million units. In view of demand for chrome wheels from the USA, this is clearly not sufficient so in the future, Oriental UMA (Zhong Shan) Automotive Decor Ltd. will give China Wheel’s products an even higher level polish as probably the most modern chromium plating plant in the world. The three pillars of China Wheel are – according to Derek Zhang - first of all reputation, secondly service and thirdly (as the a company slogan puts it) “Let customers be moved.” This really sums up how China Wheel in general and Derek Zhang in particular see alloy wheels as completely emotional products.
Continue ReadingRubberised Road Surface Trialled
A type of rubberised road surface is being trialled for the first time in the UK on a Nottinghamshire footpath. It is hoped that the new coating, which is made using the rubber from old car tyres will make it easier for disabled people and runners to use the paths. Scott Wilson, in collaboration with Nottinghamshire County Council, Charles Lawrence International Ltd, the Countryside Agency and the University of Nottingham, was awarded the funding as part of WRAP’s (the Waste & Resources Action Programme) Tyres Programme, which seeks to support demonstration trials where recycled rubber is being used in new applications utilising existing technologies.
Continue ReadingHigher Performance
Selling high performance tyres presents retailers with a unique opportunity to get onboard a market trend that not only offers the best margins, but is also growing faster than any other car tyre segment. Last year the sales of W, Y and Z rated tyres grew by more than 12 per cent compared with flat or negative growth in the remaining passenger car segment. In addition, growing numbers of car enthusiasts are attending and participating in track days using their private vehicles. Not only does this provide the owner with an opportunity to show off their pride and joy, trackdaying is also a an interesting tyre marketing opportunity. Next month’s issue of Tyres & Accessories will take a closer look at what’s happening in the highest performing segment of the UK car tyre market, bringing you the all latest analysis and product information.
Continue ReadingWRAP Launches Used Tyre Open Tender
An open tender has been launched by WRAP (the Waste & Resources Action Programme) inviting bids which will continue the momentum of developing and extending the UK’s markets for used tyres. WRAP says its aim is to provide up to 100 per cent funding support for trial and demonstration projects using rubber from UK used tyres for a wide range of construction-related applications which will have already undergone proven research and development, but have yet to be commercialised.
Continue ReadingReifen 2006 Preview
The May issue T&A features a preview of Europe’s leading tyre exhibition, Reifen Essen. Whether you are an exhibitor or are simply interesting in attending make sure you make the most of the opportunity that this feature provides. For exhibitors this section provides a unique opportunity to maximise the value of your investment, while visitors will value the opportunity to see what is ahead and plan their visit to the show accordingly.
Continue ReadingMmmmmm Donuts
Cooper Tires has set a new World Donuting record at the Santa Pod Raceway, Northamptonshire. Twenty-two enthusiasts mainly from the online Drift community, Driftworks.co.uk, helped Cooper break the previous record for the number of cars simultaneously donuting, which stood at three cars.
Continue ReadingMoscow Calling
Next month T&A will also cover the recent developments in the Russian emerging market. Focusing on the recent Tires & Rubber Moscow exhibition, our coverage will look at how the show is increasingly becoming a trade orientated show. It is also growing. A whopping 40 per cent of this year’s exhibitors were new to the show, meaning the exhibition remains Russia’s leading tyre industry show by some way.
Continue ReadingSchumacher and Bridgestone Win European Grand Prix
Michael Schumacher Bridgestone-shod Ferrari has won the European GP in front of home crowds to give Bridgestone its 97th win since entering Formula One in 1997. The result was Schumacher’s 86th win of his career. After a race-long battle, Schumacher beat the Michelin equipped Renault of Fernando Alonso into second place. Ferrari and Bridgestone’s Felipe Massa completed the podium.
Continue ReadingATS Euromaster Names New Managing Director
ATS Euromaster has appointed Ian Stuart as its new Group Managing Director, taking up the role with immediate effect. The news follows reports of previous MD Nick Gregg’s departure a little over a month ago. Ian Stuart started his career as a salesman with Kenning Tyre Services in the London area in 1980, followed by periods as Centre Manager and in Regional Sales. After a four-year period as Regional Sales Manager in London and the South East with National Tyres & Autocare, Ian joined ATS Euromaster as a Regional Manager in London and then became Managing Director of W.S. Tyremasters.
Continue ReadingMarangoni Retreading Systems Announces Price Increase
Marangoni Retreading Systems (Marangoni Tread SpA and Ellerbrock Reifenrunderneuerungs-Technologie GmbH) have announced a 4 – 5 per cent price increase on all pre-cure retreading brands and product lines. The increase will be applied from 3 July 2006 in European, East European and Mediterranean countries.
Continue ReadingImpending Master Contract Talks to Focus on Cost Cuts
(Akron/Tire Review) The United Steelworkers (USW) stated goal of protecting job security will certainly be challenged as formal negotiations begin next month for new master contracts between the Steelworkers and Goodyear, Bridgestone/Firestone and Michelin. The talks will begin against a backdrop of ever-increasing raw material, benefit and legacy costs that have forced global outsourcing of production in order to maintain profitability.
Continue Reading“I’m a Porsche Underneath”
While T&A’s favourite remain’s “White With A Hint of M42,” ASDA insurance has claimed that it has discovered the nation’s favourite white van slogan. In an online poll, ASDA Motor Insurance found every person questioned could instantly recall an amusing slogan daubed in the dirt of a white van. One third of those polled revealed their favourite slogan scrawled on the back of a dirty white van was “if only my wife was this dirty”!
Continue ReadingMichelin Credit Rating Put on CreditWatch by S&P
(Akron/Tire Review) AFX reports out of London say that Standard & Poors Ratings Services has placed its BBB+ long-term corporate credit rating on Groupe Michelin, citing concerns over the tyremaker’s profitability. S&P affirmed, however, Michelin’s short-term rating at A-2.
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