In July, the Chu Energy Automotive ET test vehicle rolled off the line in Wuhan, behind which is the owner of China's second-largest 4S group — Hengxin Automotive Group, Dai Deming, holding 10 billion in self-owned funds, gripping three cards: batteries, channels, and qualifications, looking to move up from the downstream channel to manufacture complete vehicles.

This matter hasn't made much of a splash in the automotive industry yet, but in the more 'grassroots' tire industry, the strategy of 'dealers entering the product business' has actually been in play for 20-30 years.

Currently, the replacement market for tires accounts for over 70%, dealers hold a complete grassroots network ranging from county-level repair shops to roadside tire stores, more fragmented than 4S channels and closer to real demand.

But currently, the capacity utilization rate for the entire industry is less than 70%, price wars have driven prices down to the cost line, dealers entering tire manufacturing, are they copying Chu Energy's playbook, or jumping into another fire pit?

Several Real Examples of 'Dealers Making Tires' in the Tire Industry

Let's list a few representative examples first. Qin Long, Chairman of Qingdao SenQilin, founded Sendatai in 1999. Earlier, he was an agent for Huanghai, Shuangqian, and Linglong, later also represented Michelin and Continental. Started fresh in 2007 to make SenQilin, targeting high-end passenger car tires, built a factory in Thailand, positioned in Spain. Now is an A-share listed company, revenue exceeded 4 billion in the first half of 2024, one of the representatives of domestic high-end tires.

Father and son Zhao Jianbin and Zhao Ruilong originally worked with Qingdao Ruilong Tire Technology, mainly engaging in tire import and export, owned brands 'Maibote' and 'Jingnai' under them. In 2019, Zhucheng Guopeng Rubber went bankrupt, they purchased the entire assets for 117 million, renamed Yousheng Tires to enter manufacturing; in 2024, invested another 5.16 billion to launch a new Shandong Youyue Rubber project.

Shenyang Ruihua Group Jin Penghui started in the 1990s, doing motor oil, batteries, tires, was a core agent for Toyo Tires in China, absolute channel advantage in the three northeastern provinces. In August 2025, Liaoning Hengdasheng (controlled by Ruihua) acquired with 91.59 million USD 86% equity of Tongyio Zhangjiagang, a subsidiary of Japan Toyo, renamed 'Hengdasheng Toyo Tires' — dealing for thirty years, turned around and swallowed the original manufacturer.

In 2024, Qingdao Sunset Tire Co., Ltd. planned to build a new factory in Brazil. When the news broke, the industry was shocked, this unknown dealer not only changed industries to build a factory, but also went straight overseas, likely to become the first domestic company to build a factory in Brazil.

Of course, there have been many failed attempts in recent years. In 2017, a provincial Michelin agent in East China launched a private label, commissioned a small factory in Shandong, focusing on e-commerce and partner repair shops, resulting in 2019, because the factory substituted materials, a batch of tires showed bulging and falling pieces, compensated over 2 million, the brand went bust immediately.

A large dealer in Nanjing started a private label in 2018, for 3 years, sold only 100,000 tires a year, not even as much as a big brand agent sold in a quarter, finally gave up...

Advantages of Dealers Making Tires

First is ready channels, dominating the replacement end. Over 70% of tire sales are in the replacement market, dealers already deal with hundreds of thousands of repair shops and tire stores nationwide, even sinking to county and township outlets, distributing their own brand is almost zero cost, no need to throw money at investment promotion and promotion like new brands.

Even 4S cannot match this point — 4S shops only cover new cars and warranties, tire dealers' terminals are more scattered and closer to replacement scenarios, promoting their own tires just requires giving repair shops a few percent rebate, and can expand quickly.

Second is understanding terminal pain points, products stay on track. Dealers receive feedback from repair shops every day, knowing which patterns are wear-resistant, which specs sell well in the Northeast, whether new energy vehicle owners care more about low rolling resistance or quietness, product positioning is more accurate than marketing departments of pure manufacturers.

Third is controllable capital and risk. Top dealers have stable cash flow, no need to seek financing like new forces and watch faces, first try OEM/ODM, expand if selling well, stop if not, loss is not big.

Disadvantages are equally prominent, failures far outnumber successes

First is technical and production shortcomings. Tires look simple, but formula, structure, process thresholds are not low, especially now with EV tires, silent foam, self-healing, etc., dealers lack technical accumulation, either find OEM or build factory themselves, need to hire R&D, buy equipment, high investment, long cycle, currently full industry capacity utilization is less than 70%, building a factory is like throwing money into a red ocean.

Second is conflict with agency brands. Dealers originally represent big brands like Linglong, Sailun, Michelin, starting own brand is like stealing big brands' business, big brands will definitely squeeze rebates, or even cancel agency rights, left hand fighting right hand.

Third is difficult to break brand recognition. Tires are safety parts, car owners replace tires by recognizing big brands or repair shop recommendations, own brand has no endorsement, can only take mid-to-low end cost-performance route, cannot sell at high prices, no one recognizes top end, thin profits, poor risk resistance.

Fourth is the dividend period is over. The bosses before caught the 2000-2010 window of capacity shortage and demand explosion, now capacity is overstocked, price wars driven to cost line, if you do mid-low end again, you can't make money, cannot do high end, stuck.

Now tire industry dealer profits are getting thinner and thinner, rebates for agency big brands are lower every year, some really want to integrate upwards to make their own brands, but don't blindly copy Chu Energy's 'full-chain closed loop' for car manufacturing.

The logic of tires is simpler: first OEM, avoid direct competition, use channel advantages to earn stable money, much more reliable than throwing money to build a factory and be a manufacturer. After all, even the top players in the tire industry are competing fiercely now, dealers have no technology or capacity reserves, forcing in means likely being a cannon fodder.