China Automobile Parts Holdings Ltd (CAP) plans to venture into the rubber business in China via a partnership with a Malaysian-based clean technology company.
CAP yesterday signed a memorandum of understanding (MoU) with SRI Elastomers Sdn Bhd to establish a production facility in Fujian province, China to recycle end-of-life tyres and other processed rubber scrap. The joint venture (JV) will invest US$3 million (RM11 million) to set up a production line there with a capacity of 10,000 tonnes per year.
SRI is focused on providing eco-friendly and sustainable solutions to recycling tyres and waste rubber products. Its proprietary devulcanisation process and technology, called the SRI Compound, will be utilised in the production of new value added rubber products.
CAP will have the right to produce, market, sell and distribute SRI Compound products exclusively in Fujian province, China.
The joint venture would allow CAP to broaden its revenue base by capitalising on the relationships with Chinese automobile companies that they have secured over the years.
CAP managing director Li Guo Qing said such rubber recycling technology has not made its presence in China yet and it will leverage on SRI’s expertise to expand into the China rubber industry.
“The first step is to produce rubber automotive parts but we’ll also look at producing other rubber products. As long as it brings profit to the company, and has the potential, we will look at developing it,” Li told reporters after signing the MoU here yesterday.
He said the Chinese government is supportive of environmental-friendly technology and CAP will apply for such tax incentives after agreements are finalised.
The consumption of rubber is closely tied with the automobile industry as it is the top consumer of both natural and synthetic rubber. China being the world’s biggest automobile market represents a huge demand for this technology, where there is a gap in the market for those looking for ways to disposed of used tyres.
Li said demand for rubber products in China is projected to grow 8.8% per year to 740 billion renminbi (RM437 billion) in 2017, fuelled by the healthy growth in the industrial machinery and motor vehicle industries together with the strong demand gains for both consumer automobiles and other vehicle types.
SRI CEO Gopinath B Sekhar said SRI has a production capacity of 6,000 tonnes per year at its factory in Sungai Buloh and plans to set up licensee manufacturing units around the world.
CAP’s use of premium rubber compound assures immediate market for SRI Compound consumption in automotive components applications while CAP’s network in the China automotive parts market supports the scaling of SRI Compound consumption in the region.