June 02, 2014 00:00 By Sucheera Pinijparakarn
Thai-based manufacturer tries to avoid intense pricing competition
After exploring the Chinese market for a decade, Thailand-based tyre manufacturer Deestone acknowledges that it should focus on the high-end segment in that country to avoid intense competition.
Last month Deestone executives were among those invited to attend the grand opening of Bangkok Bank’s branch in Chongqing, southwestern China.
“We have exposure in China by exporting tyres and importing raw materials for producing tyres. However, export is not easy because of non-tariff barriers erected by local tyre producers,” said Wanlaya Wongsariyavanich, deputy managing director.
China is a long-term market for Deestone because of its great purchasing power.
She said that if Deestone wanted to have any success in China, it had to move to the high-end market, because the pricing competition in the mass market was serious. It is using an online channel for sales in China as well.
More than 600 tyre companies have similar product lines to those offered by Deestone.
The company is looking for partners in Kungming and Guangzhou, both tyre manufacturers and distributors. The proportion of its sales revenue from China is projected to rise to 10 per cent within two or three years, from less than 5 per cent currently.
Even though China has advantages over Thailand in terms of manpower and lower costs, Deestone has no plan to operate plants anywhere outside this country, which has a quality rubber supply. Even Chinese tyre manufacturers have moved their operations to Thailand.
“We will continue using Thailand as the base for making tyres to supply overseas. We are building a fifth factory in Nakhon Pathom, with construction expected to be complete by the end of this year, bringing our annual production capacity to 20,000 tonnes,” Wanlaya said.
China has a clear logistical plan to connect with Asean, so southern China is a suitable market for Deestone. She added that China’s logistics projects would open opportunities for Asean trade, and the company would take advantage of these as well.
Deestone will place more importance on Southeast Asia than China because the coming Asean Economic Community will enhance business activities and transport, which will raise demand for truck and bus tyres.
Myanmar, Cambodia and Laos are three main markets for the company, while Indonesia is another potential market because of its large population. But Indonesia also has non-tariff barriers, Wanlaya said.
“If the company can boost exports in China and Asean markets, our export proportion in the next two years will rise to 70 per cent from 65 per cent currently. A major export market for Deestone is North America,” she said.
The company expects its sales revenue this year to grow by 20 per cent from Bt14 billion last year.