Extra duties on Chinese tyres: fair or foul play?

Extra duties on Chinese tyres: fair or foul play?

Well, it seems as though the gloves have come off in the tyre industry. The reason why? New duties that have been mooted on tyres imported from China.

The two parties at war are the SA Tyre Manufacturers Conference (SATMC) and the Tyre Importers Association of South Africa (TIASA). First off, I need to explain the two parties.

The somewhat strangely named SATMC (it’s not actually a conference, it’s an association) is the official industry body and trade association of the local tyre manufacturers – namely Bridgestone, Continental, Goodyear, and Sumitomo. As its name implies, TIASA, meanwhile, represents tyre importers and distributors. Its members are A1 Wheel & Tyre, Afix Trading, Apollo Tyres Africa, Automotive Technology Specialists, Auto & Truck Tyres, Lombard Tyres, Maxxis Tyres South Africa, Michelin Tyre Company SA, Pirelli Tyre, Reivilo Industrial, SA Tyre Distributors, Stamford Tyres, Tandem, TiAuto Investments, Top Drawer Tyres (Cooper Tyres), Transafrica Tyre, Treadzone, Tubestone, and Vaal Tyre Centre Holdings.

The SATMC has applied to the International Trade Administration Commission (ITAC) to impose additional duties on tyres imported from China. According to the SATMC, the ITAC investigation – initiated on 31 January 2022 – is currently in its preliminary phase. Responses received are being assessed in line with World Trade Organization and domestic regulatory and legislative criteria. The next procedural step in the investigation is a preliminary determination by ITAC, expected to be issued in August. The SATMC says the ITAC investigation is required to be finalised within 18 months from the date of initiation, with a final determination expected to be made in early 2023.

TIASA is outraged by this application – and it says the SATMC wants duties of between 8 and 69% on passenger, taxi, bus, and truck tyres (figures that SATMC has neither confirmed nor denied).

“Dumped Chinese imports amount to unfair trade”

The two warring parties have diametrically opposite points of view and I’m going to attempt to explain both. Let’s kick off with the SATMC. It says that the duties are required in view of “unfair trade caused by dumped imports of passenger, truck, and bus tyres imported from China”, and that its application is “part of a sustained effort to rescue the local tyre industry and the livelihoods dependent upon it”.

According to Nduduzo Chala, managing executive of the SATMC, Chinese tyres are being imported unfairly into South Africa at unsustainable, rock-bottom rates. “This limits the competitiveness of domestic manufacturers, who employ more than 6 000 people directly in South Africa and create indirect employment opportunities for more than 19 000 people,” he says.

The SATMC says imported tyres accounted for more than 50% of local circulation last year. Furthermore, it states that China holds the lion’s share of tyre imports into South Africa. According to data compiled independently by Lightstone Auto, over 70% of tyres sold by SATMC members in 2021 were tyres produced in South Africa.

“The four manufacturers have made sizeable investments into upping their domestic capacity, but this continues to be eroded as rising cheap imports adversely impact industry capacity utilisation. We hope that our anti-dumping application to ITAC, if successful, will help to provide a more level playing field for the South African tyre manufacturers to sustain the significant role of this industry within the economy,” says Chala.

The investigation by ITAC could lead to import duties being levied on the imported tyres from China. According to the SATMC, similar action has been taken in countries such as India, Nigeria, the United States, and the United Kingdom, in order to protect local industry and save jobs.

Naacam supports SATMC

Supporting the SATMC application, Renai Moothilal, executive director of the National Association of Automotive and Allied Manufacturers (Naacam) says the domestic tyre manufacturers are a significant part of the SA automotive manufacturing value chain. “Any production losses they face as a result of products being dumped into the country have the potential to negatively impact localisation and job levels, which is contrary to the objectives of the SA Automotive Masterplan 2035,” he notes.

Despite the economic challenges of the past three years (2019 through 2021), the local tyre manufacturers have contributed in excess of R15,9 billion to the South African economy.

“Thousands of employment opportunities have been created over the years, and the SATMC is committed to maintaining these positions and, in future, to increase this skills pool. Local manufacturers have worked hard to withstand substantial challenges to their operations and protect the entire value chain, particularly in the aftermath of the pandemic, (faced with) looting, theft, and destruction of property, coupled with ongoing challenges related to electricity supply and labour,” says Moothilal.

“The four manufacturers have made sizeable investments into upping their domestic capacity, but this continues to be eroded as rising imports adversely impact industry capacity utilisation,” he adds.

Chinese pricing is “predatory”

According to the  SATMC, tyres from China are being imported at “predatory prices” and this is causing material injury to the domestic manufacturing industry. It furthermore states that the South African Revenue Service is dealing with 64 cases of illicit trade into the country related to the tyre industry.

“This has been occurring over a number of years and the continued proliferation of large consignments of cheap imported tyres from China is something we are strongly opposed to. It is not our intention to increase tyre prices or to hit the wallets of customers. This is about fighting unfair trade. SATMC members are concerned about the knock-on effects of these destructive practices on job creation and economic growth within South Africa. We want to keep the South African manufacturing sector alive,” says Chala.

Cost of tyres to increase by up to 41%

The position of TIASA could not be any more different, and it has warned that the cost of tyres could increase by up to 41% if the SATMC application is successful.

According to TIASA, the imposition of duties is expected to have a material impact on the price of tyres, not only for passenger vehicles, but also for trucks and the vast network of taxis and buses that transport citizens across the length and breadth of the country daily. Tyres are the third biggest cost driver in transport, after wages and fuel.

If the application is successful, the taxi industry will be hit hardest, says TIASA, which maintains that the cost of taxi tyres is set to increase by 41%. It furthermore states that prices of small passenger vehicle tyres are expected to increase by 38 to 40%, while truck and bus tyre prices will rise by an average of 17%.

“SATMC’s application for duties is absurd”

 Charl de Villiers, chairperson of TIASA, has rubbished the claim that over 70% of tyres sold by SATMC members in 2021 were tyres produced in South Africa. In fact, he believes that SATMC’s application for duties is absurd. And he says that, of the almost 3 200 tyre products sold in South Africa, the applicants, according to their own price lists, collectively import 80% of the variety of tyres that they sell.

“The sad reality is that while this application makes no sense at all, it will, if successful, add a significant cost burden to motorists, taxi and bus operators, and trucking and logistics companies. Even more concerning is that vehicle owners, when faced with such dramatic cost increases, may trade down to second-hand or illicit tyres, or simply delay replacing their tyres, which places every road user at greater risk of accidents,” he notes.

XA International Trade Advisors in support of TIASA

Donald MacKay, founder and CEO of XA International Trade Advisors, agrees that the antidumping application is ludicrous, saying: “Continental and Goodyear import 100% of their bus and truck tyres, so they would essentially be asking for duties against themselves. What is even more bizarre is that Goodyear China has opposed Goodyear South Africa’s application.

“If new duties are imposed against Chinese imports, two things will happen: the first is that those importing tyres will shift imports to other (possibly more expensive) markets, increasing the price of tyres. Secondly, what naturally follows the imposition of additional duties is that domestic producers and retailers will raise the local prices to meet the imported cost,” he notes.

National Taxi Alliance backs TIASA

Theo Malele, spokesperson for the National Taxi Alliance, says its message to government is that they should be looking at every way possible to arrest the surging cost of transport.

“We already estimate that taxi fares need to rise by up to 30% due to rampant petrol price increases. If tyres go up by 41%, it will have a devastating impact on our sector, and on commuters who rely on us to transport them to and from work,” he says. “Government must intervene as a matter of urgency to reject SATMC’s application for these duties immediately.”

RFA also on Team TIASA

The Road Freight Association also appears to be part of Team TIASA. Says Gavin Kelly, its CEO: “Based on the projected 17% increase in the landed cost of truck tyres, we estimate that this will translate into a 6% increase to operators. This is AFTER the projected increases being touted for August 2022.”

While Kelly stresses that a lot more information is needed when it comes to the duties (he says there is currently a distinct lack of clarity), he believes that transport companies are already unable to afford the ever-rising operating and fuel costs, so an increase in the cost of tyres could become the final nail in the coffin for many operators. This could in turn lead to a collapse in the country’s critical road freight logistics sector.

“We are also deeply concerned about the implications for road safety. Tyres are critical to the safety of vehicles, and any rise in the costs of tyres will force some operators to trade down to inferior quality tyres, or to try and push the ‘life’ of the tyres to the bitter end – raising the risk for everyone on our roads,” says Kelly.

So, there you have it: both points of view. Do the duties amount to fair or foul play? It seems as though we’re still far from reaching a point where the tribe has spoken.

Published by

Charleen Clarke

CHARLEEN CLARKE is editorial director of FOCUS. While she is based in Johannesburg, she spends a considerable amount of time overseas, attending international transport events – largely in her capacity as associate member of the International Truck of the Year Jury.
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