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Green Wheels

By LI FANGFANG (China Daily)
Updated: 2008-09-22 08:09

It was far beyond Yves Chapot's expectation that after only two years, his company Michelin delivered the 100,000th "green" truck and bus tire to Chinese consumers.

Since it introduced its fuel saving tires to China's commercial vehicle market (the world's biggest) in 2006, the French tire maker has made energy conservation and environmental protection a point of pride for its new products.

"China's 11th Five-Year Plan (2006-10) calls for cutting energy consumption per unit of gross domestic product up to 20 percent by 2010. Michelin is making its own efforts under the Chinese government's guidelines," says Chapot.

Michelin says that with more than 400 million sold since its European launch in 1992, the green tires represent three-fourths of Michelin sales in Europe. By replacing the carbon black in the tire treads with silica, the green tire guarantees a 3 percent saving on fuel consumption, thereby enabling the tire to maintain the same level of grip while reducing heat loss.

"Green tires take up two thirds of our replacement market in China. Most of the tires we offer here are of lower rolling resistance," Chapot adds.

Michelin is the only tire maker providing green wheels for trucks and buses in China.

Industry forecasts say that by 2010 the total tire demand in the Chinese market will be around 300 million units. The demand will inevitably speed up and also hasten the application of environmentally friendly technologies.

"We think the road mobility in China is facing great challenges which result from a shortage of energy, as well as traffic problems. We hope the green tire will contribute to improving the road situation in China," says Chapot.

To publicize its efforts in China, Michelin chose Shanghai to host its 2004 Challenge Bibendum, considered one of the world's most important events promoting the development of clean energy, road safety and fuel economy. Michelin's late CEO Edouard Michelin founded the event in 1998 to celebrate the 100th birthday of the Michelin Man, the company's mascot and advertising logo, known to the French as "Bibendum".

The event returned to China again in 2007.

"The return to China was one way for Michelin and our partners to help the Chinese government chart the way forward for more fuel-efficient, cleaner, safer and less congested roads; an atmosphere that respects both people and the environment," says Chapot.

"In the future, we will continue to contribute to local communities with very strict respect to the environment and concrete commitments to local developments and specific needs," he says.

Michelin has sunk $440 million into the Chinese market since 1996. "The investment in China has proved to be the correct decision for Michelin," says Chapot.

Michelin was the first international tire maker to set up its office in China.

After establishing its sales office in Hong Kong in 1988, Michelin set up its first mainland representative office in Beijing in 1989 to promote its products and prepare the distribution channels in major cities.

"It shows Michelin's confidence in China and the local market. The policy of market opening-up and reform offers a good opportunity to Michelin by providing a favorable business investment environment," says Chapot.

However, in the early times, "how to leverage the cultural differences and combine Michelin's company culture with China's developing environment was the big challenge for Michelin", he says."Michelin needed to build up a strong local management team."

In late 1980s, a personal automobile was still out of reach for most Chinese people and as a result China's tire industry was in its infancy and professional talent was scarce.

"In the early 1990s, most of the Chinese managers' knowledge about management was quite limited, so Michelin Group sent over 10 managers from France," says Chapot.

"It leveraged the strengths and weaknesses between different cultures and the knowledge spread better and faster inside the company."

The company later also sent Chinese employees to France for training.

"We understood the challenge very well from the beginning. That's why most of the people that Michelin Group sent to China were not managers but technology experts," adds Chapot.

However, today, 15 Chinese are now working in high-level positions in France and other regional headquarters.

In China, it has 5,500 employees and plans to hire more as its business expands.

In 1994, the Chinese government jump-started the country's auto industry development with a policy officially sanctioned linking cars with the family, by first time putting forward that the private purchase of vehicles set to be encouraged to change the sedan consuming restructure.

Before that, sedans in China are limited to be sold to public. They are majorly produced for official usage.

Passenger car production in 1995 increased 85,000 units over 1994, more than the total production volume of 1991.

At the end of 1995, Michelin's first joint venture operation in China, Michelin Shenyang Tire Co Ltd was established and it was transformed into a wholly foreign-owned enterprise in 2003. The total investment currently reaches $150 million.

In 1998, China became the tenth largest auto market in the world. More auto manufacturers came to China, establishing production facilities to grab market share.

In April 2001, Michelin Group and Shanghai Tire and Rubber Co Ltd formed a new joint stock company, Shanghai Michelin Warrior Tire Co Ltd, for the manufacture and sale of radial passenger car tires with a total investment of $200 million.

The company produced domestic Warrior brand tires and started to produce Michelin brand tires in 2002.

Michelin's headquarters in China moved to Shanghai in 2001. In the same year, Michelin (China) Investment Co Ltd was set up in Shanghai, which gave the company more opportunities to develop and reinforce Michelin's long-term commitment in China.

"In 1990, the car inventory in China was 5.5 million. Now the number is up to 160 million. The fast developing Chinese market gave Michelin a big sales volume increase," says Chapot, declining to disclose specific figures.

"But we have to use different ways to solve problems. In Europe, it usually takes us half a year to make a decision since the market is quite stable and the strategies are often made for the longterm. But in China, we may make it in six weeks. The development and changes in China are very fast, so Michelin should make new decisions more actively and specifically," he adds.

Michelin's top rivals in China are US-based Goodyear and Japan's Bridgestone. The three brands occupy 60 percent of China's tire market.

However, Chapot thinks there is still huge potential for Michelin to develop.

"For example the truck tire market is the largest in the world, while the radial tire only takes 25 percent of the share," says Chapot.

"Moreover, the passenger and light truck market is held by international brands or local brands, while the truck tire market is dominated by domestic brands," he says, implying the segment will be Michelin's target in the future.

"Michelin's goal in the passenger and light truck market is to grow faster than the market average to keep our leading position."

(China Daily 09/22/2008 page6)