TIASA warns of soaring tyre prices should new duties be imposed.
The Tyre Importers Association of South Africa (TIASA), is warning that the cost of tyres could increase by up to 14% if the four large domestic tyre producers, Continental, Bridgestone, Goodyear and Sumitomo – collectively known as the SA Tyre Manufacturers Conference (SATMC) – are successful in their duty application.
TIASA is opposing SATMC’s application to the International Trade Administration Commission (ITAC) to impose additional duties on passenger, taxi, bus and truck vehicle tyres imported from China, claiming that additional duties of between 8 and 69% could be imposed over and above the current 20% tariff, percentage figures which TIASA claims were derived from the SATMC’s Application which is available in the public domain.
“The application for additional duties applies to passenger, SUV, commercial, light truck and truck and bus tyres and spans across 8 tariff codes. The increases applied for by the SATMC ranges between 8.45% and 69.97%, which is on top of the existing duties already paid of between 25%-30%.”
“Our modelling team has done the calculations on how much the landed cost of tyres will increase by, per category of vehicle if this application is successful, and the figures are staggering. What is concerning is that no explanation has been provided for the different percentages being applied for across the various tariff codes,” claims TIASA.
“The modelling was done on the basis that ITAC imposes the maximum dumping margin a claimed by SATMC in their application, we hav made this very clear that this is the worst-case scenario. In other words, this comes from their own submission to ITAC and not pulled out of thin air. In their words, they want to ‘equalise/ normalise’ pricing in the market, and the only way we can interpret this is that all prices on tyres will increase and that the consumer will be left paying for it.”
Media press conference presents platform for discussion
At a recent media press conference, attended by both industry and mainstream journalists, the panel, (made up of Charl de Villiers, Chairperso of TIASA, Donald MacKay, founder and CEO of XA International Trade Advisors, Theo Malele, Spokesperson for the National Taxi Alliance and Gavin Kelly, CEO of the Road Freight Association (RFA)), addressed the matter in more detail and took questions from the press as to how higher import duties were likely to affect the man on the street.
In an opening statement, the panel claimed the imposition of additional duties is expected to have a material impact on the price of tyres, not only for passenger vehicles, but also for trucks and for the vast network of taxis and buses that transport citizens across the length and breadth of the country daily.
Theo Malele expressed grave concerns over this, stating that the taxi industry will be hit hardest, with taxi tyres increasing by 41%; small passenger vehicle tyres by 38-40% and truck and bus tyres by 17%.
“Should the application by the SATMC approved, it could lead to the destruction and possible demise of the taxi industry,” he cautioned, “so we are appealing to government to step in, to prevent this from happening. Taxi operators will simply be unable to absorb these costs without passing them on to their passengers.
“We already estimate that taxi fares need t rise by up to 30% due to rampant petrol pric 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. Government must intervene as a matter of urgency to reject SATMC’s application for these duties immediately,” says Malele. Charl de Villiers, believes the SATMC’s application for duties is absurd, given that of the almost 3200 tyre products sold in South Africa, the applicants, according to their own prices lists, collectively import 80% of the variety of tyres that they sell.
In recent years, the local four manufacturers have downscaled production runs, with two (Continental and Goodyear), importing their entire quota of truck and bus tyres to service local demand. This is not unusual, as it would be impossible for any country to produce every tyre size that is required by the OEMs and th replacement market.
Bridgestone and Sumitomo are continuing to produce tyres for the commercial market locally, but notwithstanding, are unable to adequately meet market demand, without having to rely on imported products to supplement their range.
“The sad reality is that while this application makes no sense at all, it will, if successful, add a significant cost burden to motorists, tax 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 a greater risk of accidents,” claimed de Villiers.
Donald MacKay, 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, and 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. Great for profits, but very bad for consumers.”
*European tyre producers have also established tyre plants in China, to supplement production volumes emanating from their European manufacturing facilities.
“Rising inflation is putting South African consumers and motorists under extreme financial pressure,” added de Villiers. “The consensus is that there appears to be little light at the end of the tunnel. The bottom line is that South Africa, and South African motorists and those operating in the trucking, taxi and mass transport sectors, can ill-afford any interventions which may further drive up road freight or transport costs, which are key drivers of inflation.” Gavin Kelly concurred: “80% of all of South Africa’s food, medicines, fuel and many other goods are transported via road, given the collapse of the rail system.
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. In its April report, Stats SA said that transport continues to drive inflation higher. Transport costs are continuing to climb, with the main driver being the surging price of fuel, (the price of fuel was R14.86 in January 2021, and is now a staggering R26.74 (inland) per litre.
Added Kelly: “Transport companies already cannot afford the ever-rising operating and fuel costs, and so an increase in the cost of tyres could become the final nail in the coffin for many operators, leading to a collapse in the country’s critical road freight logistics sector.
“Tyres are a huge cost factor for roa transporters in South Africa, any increase in costs upstream, will ultimately filter down to consumers, as most operators will be unable to absorb the full cost increases, thereby causing a knock-on effect onto the consumer.
Kelly added: “We are 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 ris for everyone on our roads.”
SATMC defends its applicaton
In response to these allegations, the SATMC claims that its latest application for antidumping duties to be levied on passenger, truck and bus tyres imported from China, is part of a sustained effort to rescue the local tyre industry and the livelihoods dependent upon it. The industry body represents the four tyre manufacturingcompanies in South Africa – Bridgestone, Continental, Goodyear and Sumitom Rubber South Africa – on trade, economic and environmental policies, and tyre sector regulations.
Nduduzo Chala, Managing Executive of the SATMC said: “The SATMC is not against healthy trade and competition at fair prices, but rather against certain Chinese designed and manufactured tyres that are 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.”
“SATMC companies themselves work with tyre importers who demonstrate fair pricing, prioritise quality and safety, and are able to offer excellent after-sale service, guarantees and insurance, uplifting the domestic tyre sector and road safety industry as a whole,” said Chala. In 2021 imported tyres accounted for more than 50% of local circulation, according to SATMC research. China holds the lion’s share of tyre imports into South Africa. Chala says the four manufacturers are committed to local production and ensuring its growth in the future.
“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 the International Trade Administration Commission (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,” said Chala.
Similar actions have been introduced in countries such as India, Nigeria, the United States and the United Kingdom, in order to protect local industry and save jobs. In supporting the SATMC application, Renai Moothilal, Executive Director of the National Association of Automotive and Allied Manufacturers (NAACAM) said:
“The domestic tyre manufacturers are a significant part of the SA automotive manufacturing value chain, and 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.”
Despite the economic challenges of the past three years between 2019 and 2021, the local tyre manufacturers had contributed in excess of R15,9 billion to the South African economy, claims SATMC.
“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. We have also developed the industry via supplie development, employee contributions skills development, corporate social investment and enterprise development, in addition to investments into their loca manufacturing plants. 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, looting, theft and destruction of property, coupled with ongoing challenges related to electricity supply and labour,” he said.
The SATMC’s application to ITAC asserted that tyres from China were being imported at predatory prices and causing material injury to the domestic manufacturing industry. He said the South African Revenue Service was 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 knockon effects of these destructive practices for job creation and economic growth within South Africa. We want to keep the South African manufacturing sector alive. That is why we are arguing for duties on cheaply imported tyres,” said Chala.
Illicit trade practices around the importation of tyres are certainly on th rise with sub-standard tyres finding thei way into the local market, some du to under-declarations and fraudulent paperwork. On this aspect, SATMC and TIASA appear united, with both parties in stron support of clamping down on the rising number of unscrupulous importers who are not playing by the rules.
*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 would be a preliminary determination by ITAC which is expected to be issued in August. 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. At the time of going to press, ITAC had allegedly decided to implement an antidumping duty for a period of six months, during which further investigations into the matter will be made. However, no official announcement has been issued by ITAC confirming this. The industry is left hanging, with several importers of product from China forced to cance their orders, placing them in the precarious position of being unable to service their customers.