On May 11, Linglong Tire issued an announcement announcing the termination of the 6.066 billion yuan production expansion project in Tongchuan, Shaanxi Province. The project will no longer be advanced. The production capacity blueprint written five years ago has stopped on paper.
This plan was once placed in an important position in the company’s national layout, with an annual output of 15.2 million sets of high-performance radial tires and 500,000 sets of retread tires. It was originally aimed at the northwest market and also towards Central Asia, but now only the word “termination” remains.
The announcement mentioned that the project was advancing slowly and the relevant supporting measures were not implemented as planned. The cumulative investment in the early stage was about 380 million yuan. Whether this fund can be fully recovered, the market has begun to re-estimate.
This news attracted attention not only because of the large scale of investment, but also because it occurred at a stage when the tire industry was repricing its own rhythm. Production expansion no longer naturally equals growth, and implementation efficiency and capacity utilization began to be prioritized.
The planning of the Tongchuan project is not simple. In June 2021, Linglong Tire’s board of directors reviewed and approved relevant proposals, and the shareholders’ meeting also completed approval. The total investment of the project is 6.066 billion yuan, and it is planned to be constructed in three phases with a cycle of 6 years.
According to the assumptions at that time, after the completion of the project, it can form a relatively complete production capacity fulcrum in the northwest, which can not only reduce logistics costs, but also serve the local market and overseas radiation needs. It is estimated that the annual revenue will be 6.345 billion yuan and the annual net profit will be 457 million yuan.
This model is not uncommon in 2021. At that time, tire companies are generally in the stage of accelerating their layout, and many places in the country are launching new projects. The core of the company’s judgment is to seize production capacity, seize location, and seize the window period.
Tongchuan’s geographical location had high hopes. Located in the northwest region, it has the imagination space to undertake the transfer of manufacturing industry and the narrative space for the market along the “Belt and Road”. This is also an important reason why the project was promoted that year.
However, the subsequent trajectory of the project did not follow the preset direction. Although the announcement was restrained, the market could see a sense of stagnation. The supporting facilities did not keep up, the pace was slowed down, and the investment recovery model also changed accordingly.
This type of change is not an isolated case. The biggest change in the tire industry in the past two years is not the advancement or retreat of a single project, but the rewriting of production capacity logic. The past storytelling method of expansion has begun to encounter realistic constraints.
In recent days, many media have been following up on this announcement, and their reports have focused on several details. The first is the termination of the project, the second is the investment of 380 million yuan, the third is that the supporting conditions have not been in place, and the fourth is that the company will adjust resources to the existing base.
These statements are almost consistent, indicating that the market has reached a consensus on this matter. The Tongchuan project is not an isolated incident, but a node in the industry’s transformation.
Linglong Tire is not incapable of continuing to expand. The question is whether continuing to advance is still in line with the current environment, especially after the changes in supply and demand in the domestic tire industry, the marginal benefit of simply increasing production capacity has been declining.
In 2025, the domestic production of pneumatic rubber tires will reach 1.207 billion units, with the growth rate slowing down and the total output of automobile tires falling by 1.59%. This set of data gives the industry an intuitive signal that the growth mode is switching.
Another set of information has also been mentioned frequently. In 2026, new production capacity in the industry will still be released intensively. The rebound in output will be parallel to the new projects. The export end will be under pressure again, and the tension between market supply and demand will continue to be amplified.
This is one of the reasons why the Tongchuan project has been repeatedly discussed. The project was originally expected to bring an annual net profit of 457 million yuan. In the current environment, the profit model needs to be re-examined. Price, load rate, freight, and supporting facilities will all affect the results.
The pressure of overcapacity is not abstract. It will be directly transmitted to the operating rate, single tire selling price and inventory turnover. The competition method within the industry will also change accordingly. Whoever can keep costs more stable and who can go deeper into high-end will have more space.
Linglong emphasized in its announcement that early preparations were slow. Behind these four words, it usually means that multiple links are not connected on schedule, including land, approvals, infrastructure, upstream and downstream supporting facilities, and construction organization. If any link is slowed down, the project cycle will be lengthened.
The local industrial conditions in Tongchuan have also been re-examined. Tire manufacturing is not an industry that can take off from a single location. It relies on raw materials, logistics, energy, equipment, technical personnel and supporting supply systems. The longer the chain, the higher the requirements.
Such projects often come with ideal models in the planning stage. Once they actually enter the implementation stage, the actual costs will rise step by step, especially for large-volume manufacturing projects. Once the time is extended, the industry prosperity may change significantly.
Linglong’s current choice is to put resources back into its existing base. This move is not unexpected. Since the returns from new projects are uncertain, it is usually safer to increase the utilization rate of existing production capacity first than to continue to spread the pie.
In the reports of the past two days, another piece of information has been mentioned repeatedly. Linglong is not only facing adjustments to the Tongchuan project. The progress of the Anhui Lu’an project and the Brazil project has also not met expectations. This allows the outside world to see a contraction in pace under multi-line advancement.
The importance of this set of information is that it shows that the termination of Tongchuan is not a single failure, but that the company has simultaneously entered the calibration stage in multiple overseas and domestic layouts, and the pace of capital expenditure is returning to a prudent range.
The strength at the company level has not disappeared just because a project was terminated. Linglong Tire is still the leading company in the domestic tire industry and continues to make efforts in the global supporting market, with layouts in passenger cars, trucks and buses, and off-highway tires.
The technical aspects are also interesting, such as dandelion rubber, air-free tires, 63-inch all-steel giant tires, etc., which shows that the company has not stayed in the stage of simply striving for production capacity. Manufacturing capabilities and R&D capabilities are still its underlying assets.
This is also the reason why many reports in recent days have adopted a relatively restrained approach. The market does not interpret the termination of the Tongchuan project as a loss of competitiveness of the company, but rather regards it as a round of contraction and correction of capital expenditure logic.
This kind of correction is not unique to Linglong. Leading companies are generally adjusting their pace. When launching a project, they focus on scale and layout. When evaluating a project, they look at the rate of return and cash-out probability. The industry language has changed.
Some media call this termination a stop loss, while others believe that an investment of 380 million yuan is not a big deal for a company with a large revenue. What is really worthy of attention is how the subsequent resource allocation will change.
This view is obviously divided among the investor community. Some people value short-term losses more and believe that the project was delayed for five years and was eventually terminated, indicating that the cost of early decision-making is high. Others believe that timely exit is more important than continued investment.
This type of disagreement is also worthy of discussion in the comment area. Different perspectives will give different judgments on whether project adjustments during the expansion period of a company are considered strategic mistakes or inevitable actions due to industry cycle changes.
Judging from the text of the announcement, Linglong’s attitude is not intense, and the focus of expression is on changes in project conditions and reallocation of resources. This writing style is closer to the communication method of the capital market than emotional expressions.
But if you put the announcement into a larger industry picture, you will find that the competition method of tire companies is changing. The era of relying solely on new projects to increase scale has passed. What follows is the efficiency of unit capital and the capability of high-end products.
This is also a realistic reminder brought by the Tongchuan project. The project itself is not without value, but the time window, regional supporting facilities, industry prosperity and corporate rhythm must be matched at the same time. Any misalignment will affect the final result.
Industry data in 2025 have shown that output is still growing, but the growth rate is slowing down. Price wars, homogeneity, and inventory pressure are all on the rise. Expanding production is no longer a one-way correct action.
In this context, Linglong’s termination of the Tongchuan project is both like a brake and a reordering. It puts down the parts with high uncertainty first, and then concentrates resources on areas and products that have already formed advantages.
Discussions in recent days have also led to several side topics, such as buyback plans, overseas production capacity, raw material prices, industry concentration, green manufacturing, export frictions, and smart manufacturing. These contents are all put on the same table and viewed together.
Linglong has previously disclosed the market expectations of the buyback plan. Such actions are usually regarded as a signal of confidence. When viewed together with the termination of the project, the outside world will naturally pay more attention to how the company will balance investment and returns.
Overseas layout is also an unavoidable topic. Many companies in the industry are dispersing production capacity overseas to hedge against trade barriers and regional market changes. The progress of the Brazilian project is not as expected, which also makes Linglong’s globalization path appear more cautious.
Raw material prices will also affect the business judgment of tire companies. Once cost items such as natural rubber, synthetic rubber, carbon black, and steel cord fluctuate, project estimates will deviate from the original values, and production expansion plans will also be re-evaluated.
Increased industry concentration is also a direction that has been mentioned in recent days. Leading companies have stronger funds, channels and R&D capabilities. After the logic of production expansion turns to the logic of efficiency, the living space of small and medium-sized enterprises will continue to be compressed.
Green transformation is also frequently talked about, including low-carbon factories, recycled materials, energy-saving equipment, and waste tire reuse. The significance of these projects is not just at the publicity level. They will directly affect future order acquisition and market recognition.
On this line, Linglong’s ROUTE sustainable development strategy has also been mentioned again, indicating that the company is not putting all its resources into traditional production capacity, but is looking for a balance between manufacturing upgrades and long-term competitiveness.
From the perspective of the capital market, the core of the termination of the Tongchuan project is not the end of a project, but the company’s reaffirmation of the boundaries of capital expenditures. In the past, it could be launched first and then supported, but now more emphasis is placed on verifying first and then advancing.
The impact of such changes on the industry will continue to amplify, especially when new projects are still being released, the export environment is disturbed, and demand growth is slowing down. Whoever can control the pace of investment will be more likely to retain profits.
Linglong Tire’s termination of the Tongchuan project this time left the market with not a simple loss figure, but an industry sample, showing that expansion is not always the answer. When the rhythm is out of balance, withdrawal is also an ability.
What is worth watching next is not only whether the 380 million yuan can be recovered in full, but also where the company will invest its resources, how far it will advance the intelligent transformation of its existing bases, and whether there will be any new changes in its overseas layout.
It also depends on whether similar adjustments will continue to occur within the industry. If more companies begin to shrink and expand high-risk production, the competition method in the tire industry will further shift from fighting for scale to fighting for efficiency. At that time, the valuation logic will also change accordingly.
This termination is not the end, but more like a midway correction in an industry cycle. The production expansion plan written five years ago was not completed, but the market five years later gave another answer, and companies must rearrange their next steps accordingly.
