EqualOcean has learned that the industry leader in tires, Sailun(赛轮轮胎), is steadily advancing the construction of its factory in Mexico, currently in the preliminary stage of handling project procedures, with an expected commencement of operations in the first half of 2025.
Founded on November 18, 2002, Sailun, headquartered in Qingdao, Shandong Province, is a research and demonstration base for rubber and tire engineering technology designated by the National Development and Reform Commission. It is also the first in China to integrate new materials, technologies, equipment, processes, and management models into an informatized production demonstration base. The group's mission is to "make good tires," dedicated to providing global tire users with higher-quality products and services, and advancing the high-quality development of the rubber tire industry with advanced technology.
As early as December last year, Sailun announced that its wholly-owned subsidiary, Sailun Singapore, had signed a Joint Venture Agreement with TD International Holding, S.A.P.I.DE C.V. (hereinafter referred to as "Mexican TD"). Both parties intend to establish a joint venture company, investing USD 240 million to build a project with an annual production capacity of 6 million semi-steel radial tires.
According to the announcement, the registered capital of the proposed joint venture company is USD 120 million, with Sailun Singapore and Mexican TD holding 51% and 49% of the shares, respectively. Both parties will purchase the production capacity of the joint venture company according to their shareholding ratio. Mexican TD will provide support for the administrative management, processing, and maintenance of external relations of the joint venture company, with a project construction period of 12 months.
Industry insiders believe that Sailun's choice to jointly invest in the factory with a local Mexican company can greatly reduce investment costs, benefiting capacity digestion and risk mitigation in trade. The deep involvement of local enterprises will facilitate the smooth progress of the project and future capacity release. Additionally, Mexico, located in the more influential North American market adjacent to the United States, could represent a significant step in the company's global strategy.
Benefiting from the "scrappage for new" policy and the steady growth of automobile ownership, amid declining consumption in Europe and the United States, the cost-effectiveness advantage of Chinese tires is becoming more prominent. According to data released by the General Administration of Customs of China in 2023, the export volume and value of tire tread continued to reach historical highs, increasing by 16.7% and 13.8% respectively compared to the previous year, reaching 8.291 million tons and USD 20.54 billion. The market share of Chinese tires in overseas markets continues to rise.
EqualOcean has learned that in 2023, Sailun continued to expand the production capacity of its two overseas factories in Vietnam and Cambodia, and planned to build factories in Mexico and Indonesia to expand its global layout, enhance its ability to cope with international trade barriers, and better meet customer demand. The company's introduction of liquid gold tires effectively addresses the dilemma of traditional tires' inability to balance "rolling resistance, wear resistance, and wet skid resistance," receiving widespread praise from car manufacturers and consumers, significantly boosting sales and enhancing the company's overall competitiveness.
The positioning of Sailun's Mexico project is aimed at markets such as North America, expecting to achieve higher economic returns. The announcement indicates that after the project reaches production, it is expected to generate annual operating revenue of USD 219 million and a net profit of USD 40.59 million. According to financial analysis and evaluation results, the project's post-tax investment payback period is 6.33 years, with a net profit margin of 18.50%.
Regarding the Mexico factory project, Mexican TD will provide strong support in various aspects. Mexican TD has a complete sales network and rich experience in localized operations. Additionally, Mexican TD has pledged to support the administrative management, processing, and maintenance of external relations for the Mexico factory.