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22. November 2006

CHINA: Tyre giant ready for production

Source: China Daily, Beijing; 22 Nov 2006

Continental AG, an automotive components maker and
supplier, said it is entering the endgame of a 200
million euro (US$256 million) investment to start
making high performance tyres in China.

"We are making the final decision of the destination
between two Chinese cities for passenger- and
light-duty truck-use tyres production," said Manfred
Wennemer, chief executive officer and chairman of the
executive board of Continental during his visit to
Auto China 2006 in Beijing. The CEO refused to disclose
the names of the cities.

Wennemer also said after manufacturing tyres here, his
company plans to open 100 retail stores in the country by 2007.

"The distribution of our tyres will be combined with
franchised and wholly owned stores," Wennemer said.

China has been the world's biggest rubber consumer for
the past two years, with annual consumption exceeding
3.1 million tons. The strongest demand for rubber
resulted from strong domestic tyre consumption.

Statistics from the China Petroleum and Chemical
Industry Association show domestic tyre production
volume hit 300 million units last year, 19 per cent
higher than in 2004. Sales revenues hit over 79
billion yuan (US$10 billion), the best performance in
the past 10 years, and a 29 per cent increase from 2004.

Since entering the China market in 2002, Continental
has had a very slim market share in the tyre market
through its dealerships in 10 coastal provinces.

In China, "we only provide tyres for replacement for
high-end imported vehicles which come from our global
OEM (original equipment manufacture) partners like
BMW, Mercedes-Benz and Porsche," Wennemer said.

He added that the company is dealing with its
latecomer status in the market. "We are ready to
invest here to establish the Continental brand in the
China tyre market," Wennemer said.

The Hanover-based company achieved a growth rate of 20
per cent last year in China through its automotive
system and non-tyre rubber business ContiTech. "We are
confident we can continue this figure, excluding the
added 200 million euros (US$256 million) investment,"
Wennemer said.

Among the world's top three tyre manufacturers,
Japan's Bridgestone established its first China
foothold in 1999, France's Michelin in 1989 and the
US's Goodyear in 1994.

Since 2002, Continental has invested 25 million euros
(US$32 million) in China, establishing 13 facilities
in nine provinces and regions.

Through the acquisition of Motorola's global auto
electronics business last year, Continental raised its
investments in China from 3.5 million euros (US$4.49
million) in 2004 to 16.9 million euros (US$21.66 million).

According to Wennemer, due to these acquisitions, from
2000 to 2005, Continental has "no money to invest in
China. However, due to the profitable turnover, now we
attach importance to China."

Syed Rashid Ali

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