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Radial tyre manufacturers face increasing competition
Excessive supply and increasing competition in the market for radial tyres which allow for better fuel economy is expected to come after investors rushed to invest in the product.
The new investments signal a change in direction for the industry which until now has largely focused on the production of bias tyres which are known for increased rolling resistance and less control and traction at higher speeds.
In recent times, demand for rubber products, especially tyres, has increased due to strong growth in the auto market. Until now, the domestic market, which lacked the technology to produce the tyres locally, has been reliant on German and Japanese imports.
The Viet Nam Chemical Group (Vinachem) is one company that has invested in building factories which specialise in producing the tyres.
Southern Rubber Industry Joint Stock Company, a Vinachem subsidiary, has alone poured VND1 trillion (US$55 million) to build a factory capable of producing 1 million radial tyres a year in Binh Duong Province. Production is expected to come online in 2011.
Da Nang Rubber Joint Stock Company (DRC), another Vinachem subsidiary, will also start construction of a radial tyre factory in the central Da Nang City. The plant is set to produce 600,000 radial tyres a year starting in 2011.
Vinachem said the investment into radial tyre mills was a strategic decision that would help reduce reliance on imported products and increase the value of rubber in Viet Nam.
The two plants are expected to reach a combined production capacity of 2 million units a year. But at present, national yearly consumption stands at 1 million units, fuelling concerns about an oversupply in the market.
Dam said the company would explore exporting opportunities to avoid over production for the domestic market. To date, Vietnamese businesses have produced around 300,000 radial tyres.
vietnamnews
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