Tire manufacturer Kenda Rubber Industrial Co (建大輪胎) yesterday said it expects sales to grow this year, buoyed by rising output triggered by China’s bike-sharing boom.
“We started making tires for bike-sharing platforms at the end of last year and demand is much better than expected,” a company official said by telephone.
The company’s major customers include Ofo Inc (共享單車) and Beijing Mobike Technology Co Ltd (摩拜科技), the top two bike-sharing service providers in China.
New bicycle sales to bike-sharing platforms in China are expected to reach more than 30 million units this year, according to Kenda’s estimates.
This year, revenue contribution from bicycle tires is expected to reach 25 percent of total sales, compared with last year’s 22 percent, the company said.
While tire orders for bicycle-sharing platforms have lower gross margins than those for regular bicycle tires, demand for regular bicycle tires has declined, therefore tire orders for bike-sharing platforms can boost Kenda’s capacity utilization rate and help the company maintain its revenue, Capital Securities Corp (群益證券) said in a client note on April 12.
“Additionally, as Kenda’s bike-sharing orders mainly come from well-known, large vendors in China, payments are relatively stable. Hence, we reckon that a higher bike-sharing-related output might have positive effects for Kenda,” Capital Securities said.
To meet increasing demand, Kenda’s Indonesian plant will start making bicycle tires this month, with a targeted capacity of 60,000 units per day, the company official said.
The company has a daily capacity goal of 300,000 units for this year, compared with the current 200,000 units per day, the official said.
As part of the firm’s capacity expansion plan for this year, a new plant in Vietnam will start production in the fourth quarter and will manufacture 25,000 units of car tires per day, the official said.
Due to a surge in raw material prices since the end of last year, the company plans to hike its product prices by 10 percent next month, the official said.
The price hike would be the second since the beginning of this year after the company raised prices by 5 percent in the first quarter.
However, the price adjustments have yet to fully reflect increasing raw material costs, considering market acceptance, the company said.
In the first quarter, global natural rubber prices soared by nearly 70 percent to US$2,200 per tonne from US$1,300 a year earlier, Kenda said.
From January through last month, the company posted accumulative sales of NT$7.3 billion (US$240 million), a 1.57 percent increase from a year earlier, according to a company filing with the Taiwan Stock Exchange.
The company yesterday gave an optimistic outlook for this quarter, as it is entering peak season for the tire industry.
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