Continental AG, an automotive components maker and supplier, said it is entering the endgame of a 200 million euro (US$256 million) investment to start making high performance tyres in China.

 

"We are making the final decision of the destination between two Chinese cities for passenger- and light-duty truck-use tyres production," said Manfred Wennemer, chief executive officer and chairman of the executive board of Continental during his visit to Auto China 2006 in Beijing.

 

The CEO refused to disclose the names of the cities.

 

Wennemer also said after manufacturing tyres here, his company plans to open 100 retail stores in the country by 2007.

 

"The distribution of our tyres will be combined with franchised and wholly owned stores," Wennemer said.

 

China has been the world's biggest rubber consumer for the past two years, with annual consumption exceeding 3.1 million tons. The strongest demand for rubber resulted from strong domestic tyre consumption.

 

Statistics from the China Petroleum and Chemical Industry Association show domestic tyre production volume hit 300 million units last year, 19 percent higher than in 2004. Sales revenues hit over 79 billion yuan (US$10 billion), the best performance in the past 10 years, and a 29 percent increase from 2004.

 

Since entering the China market in 2002, Continental has had a very slim market share in the tyre market through its dealerships in 10 coastal provinces.

 

In China, "we only provide tyres for replacement for high-end imported vehicles which come from our global OEM (original equipment manufacture) partners like BMW, Mercedes-Benz and Porsche," Wennemer said.

 

He added that the company is dealing with its latecomer status in the market. "We are ready to invest here to establish the Continental brand in the China tyre market," Wennemer said.

 

The Hanover-based company achieved a growth rate of 20 percent last year in China through its automotive system and non-tyre rubber business ContiTech. "We are confident we can continue this figure, excluding the added 200 million euros (US$256 million) investment," Wennemer said.

 

Among the world's top three tyre manufacturers, Japan's Bridgestone established its first China foothold in 1999, France's Michelin in 1989 and the US's Goodyear in 1994.

 

Since 2002, Continental has invested 25 million euros (US$32 million) in China, establishing 13 facilities in nine provinces and regions.

 

Through the acquisition of Motorola's global auto electronics business last year, Continental raised its investments in China from 3.5 million euros (US$4.49 million) in 2004 to 16.9 million euros (US$21.66 million).

 

According to Wennemer, due to these acquisitions, from 2000 to 2005, Continental has "no money to invest in China. However, due to the profitable turnover, now we attach importance to China."

 

(China Daily November 22, 2006)