Aeolus Tyre's Strategies for Surviving the Crisis       

Located in Jiaozuo of Henan province, Aeolus Tyre Co., Ltd. (Aeolus Tyre, SH: 600469) was founded in 1965. The company said it is one of the Chinese top 10 tire corporations and the top original tire supplier for Chinese leading engineering machinery corporations. Aeolus Tyre is capable of producing over 5 million sets of radial tires and earning sales revenue of around RMB6.0 billion annually. The main products of the company consist of radial off-the-road tire, truck & bus radial tire, light truck radial tire, and etc. China Haohua Chemical (Group) Corporation holds the largest 42.58% share in Aeolus Tyre.
   Aeolus Tyre produces tires of six categories which are of more than six hundreds kinds and sizes.
   From January to June 2009, the company's gross profit rate was 18.19%. Its revenue was RMB2.473 billion, down 29.20% year on year, and its net profit was RMB129 million, a big increase of 98.74%. Sales revenue decline in first half of 2009 was mainly because of the continuous depression in exports, as well as domestic loading truck and shovel loader market. The reason for the increase of net profit was that the cost price of main raw materials, rubber in particular, plunged about 40% from that in the fist half of 2008. Moreover, the company had adjusted timely its product portfolio and market distribution, and promoted sales in its favorite markets. All of these strategies have dramatically improved its profitability.

Anti-crisis Strategy    

Integrating local markets   

Henan province is the most important local market to Aeolus, for it offers the lowest transportation cost with the shortest sales radius. Facing the economic crisis, Aeolus Tyre conducted market restructure and integration in Henan province and has achieved good results. The sales revenue of all the brands of Aeolus Tyre saw a big year-on-year increase of 71% from January to August 2009. And in August 2009, the sales volume of tire maintenance market in this region increased 126% year on year.

Changing marketing model   

In 2009, Aeolus Tyre successfully implemented a new marketing strategy and expanded the maintenance market, original equipment (OE) tire market and export market.
   Aeolus Tyre has gained ground in the replacement market, which features big market capacity, high sales price, and high settlement ratio. In terms of marketing strategy, Aeolus Tyre has leveraged all its superior resources to build the maintenance market. In early 2009, it had specifically improved the incentive mechanism for sales personnel in tire maintenance business.
    Aeolus Type has also optimized OE market structure, trough expanding market channel terminals and offering point-to-point support solutions to key clients. Aeolus Type has decided to concentrate all its superior resources to provide high quality service for the large-scale enterprises with high credibility such as Dongfeng Motor Corporation, China International Marine Containers Group, Guangxi Liugong Machinery Co., Ltd., Lonking (Fujian) Machinery Co., Ltd., and Xiamen XGMA Machinery Co., Ltd. etc. Aeolus Type has increased its OE share in Dongfeng Motor Corporation from 60% at the beginning of 2009 to 80% by August 2009, and from 60% to 85% in Liugong Machinery. Meanwhile, Aeolus Type resolutely gave up the clients that feature small scale, high marketing cost and limited development potential.
    The company has adopted a brand differentiation strategy to explore the emerging export markets such as South America and Africa since the beginning of 2009. Despite encountering the anti-dumping investigation on made-in-China tires, the company's orders for high-end tire products from Europe and the US in May, June, and July increased by 30%, 20%, and 25% month over month, respectively. Among the emerging markets, orders from South America market in these three months remained stable as usual, and those from Africa and Middle East increased by 15% and 10% year on year respectively.

Bright prospects in the second half of 2009    

   Through the above strategies, the maintenance business, with a high gross profit margin, increased its contribution to the company - offering 40% of the total sales revenue in the first of 2009. The company has been keeping full-load production Since June 2009.
   The 150 000 sets per year fund raising engineering radial tire project that Aeolus Tyre began to build in late 2008 has been completed at present. Now, the company is planning to invest another RMB1.006 billion on a 5 million set-per-year passenger vehicle radial tire project, which is scheduled to be launched by the end of 2009 and put into operation in mid 2011.
   The tire special protection case has basically no influence on the Aeolus Tyre's export business. The US expected 35% to 55% special protection tariff was mainly imposed against passenger vehicle tires and light truck tires. Aeolus Tyre mainly exports loading tires to the US and other countries, and light truck tires account for less than 10% of its total tire capacity. In 2008, it only exported 10 000 sets or so of light truck tires totally. The sales revenue of tires that were exported to the US by the company was RMB143 million in 2008, accounting 2.35% of its total. However, the company made no comments on the influence of the special protection case to its new 5 million sets per year project.