Supply chain struggles escalate, according to Continental China's CEO Enno Tang, due to escalating price disputes.

Continental Expands Tire Factory in Hefei, China

Continental AG, a leading German automotive parts manufacturer, has embarked on the fourth expansion of its tire factory in Hefei, China. This move is part of the company's strategic investment and expansion in the Chinese market.

The Hefei factory, known for its green and sustainable practices, produced nearly 26 million kilowatt-hours of green electricity in 2023 and reduced 25,000 tons of carbon emissions. The factory's expansion is expected to boost its annual output to 17 million units when it reaches full capacity in 2027.

Continental is responding to the stringent Euro 7 emission standards with extensive technical reserves, production processes, rubber refining, and the use of renewable materials. The company is also leveraging its resources, including a tire R&D center in Hefei, and using test tracks owned by Continental Automotive for trials.

The success of the Hefei factory can be attributed to its market share, strategic positioning, local employees, partnerships, and the supportive business environment in Hefei. Continental's sales in China achieved an 11% year-on-year increase in 2023.

However, the company faces challenges in meeting the increasing performance requirements and larger tire sizes for electric vehicles. The instant high torque generated by electric motors poses new demands on tire braking performance. Additionally, the success of Chinese tire manufacturers has led to increased competition, price wars, and the impact of US and EU tariffs on Chinese electric vehicles.

To cope with these challenges, Continental is localizing the entire industrial and value chain in China, encompassing upstream raw material supplies, technology R&D, and production equipment manufacturing. The company is also enhancing its technological leadership and fully localizing its industrial and value chain to respond to price pressure in the highly competitive Chinese automotive market.

Data from the China Passenger Car Association (CPCA) shows that, in 2023, the total volume of compact passenger cars in China increased by 9.2% year-on-year, while domestic tire sales reached 393 million units, a 20.7% increase. This growth in the market is pushing Continental to continually reform, with existing production capacity reaching its limits.

Continental has made significant progress in the NEV market, backed by excellent products, reliable quality, a mature and complete system, and continuous investment in China over the past 15 years. The company's excellent technologies in braking modules, such as the one-box integrated braking system MK C2 and the "E drum" highly integrated drum brake system, support energy saving and emission reduction.

Despite facing challenges, Continental is taking measures to enhance its profitability. The company has reportedly initiated layoffs, cut costs, implemented efficiency improvement measures, and divested parts of its automotive business to focus on its main tire business.

However, it is worth noting that there is no information about Continental's research and development facilities for electronic vehicle components such as batteries in China in the provided search results. This could be an area for future expansion and investment for Continental in the Chinese market.

In conclusion, Continental's expansion in Hefei is a strategic move to meet the growing demand for tires in the Chinese market, particularly for electric vehicles. The company is committed to localizing its industrial and value chain, enhancing its technological leadership, and adapting to the fast-changing market demands in China.