Wanli Tires, South China’s largest radial tire manufacturer, has filed for a 2 billion yuan IPO on the Shenzhen Stock Exchange. Between 2023 and 2025, revenue grew at a 12.14% compound annual growth rate to cross 7 billion yuan level, but net profits stagnated below 5.3% due to falling gross profit margins and little pricing power against raw material costs. Operating on a less profitable overseas trader model rather than a dealership network, the company suffers from low brand premium, a higher selling expense ratio, and a lagging R&D rate of just 1.05% compared to peers. Despite a sector down-cycle and a closing window for Southeast Asian manufacturing advantages, Wanli is pushing a high-stakes 56.7% capacity expansion in Cambodia, Malaysia, and its domestic base, raising questions about its cross-border management and long-term competitiveness.
Wanli Tires, the largest radial tire manufacturer in South China, has recently filed for an IPO on the main board of the Shenzhen Stock Exchange, seeking to raise about RMB 2 billion.
As a regional leader with years of deep industry experience, Wanli Tires’ prospectus reveals a story of “rising revenue without corresponding profit growth”: over the past three years, the company’s revenue surpassed the RMB 7 billion mark, while net profit remained virtually stagnant. Meanwhile, its gross margin continued to decline, its ability to pass on costs weakened, and its R&D investment lagged far behind that of its peers.
Against the backdrop of aggressive capacity expansion during an industry-wide overcapacity cycle, the IPO underscores the broader challenges facing China’s second-tier tire manufacturers in their pursuit of growth.
Increasing Revenue Without Increasing Profit
From 2023 to 2025, Wanli Tires’ revenue grew from RMB 5.588 billion to RMB 7.028 billion, representing a compound annual growth rate of about 12.14%. Yet the company’s expanding top line barely translated into bottom-line growth: net profit attributable to shareholders of the parent company rose only marginally, from RMB 398 million to RMB 419 million during the period, a cumulative increase of RMB 21 million, or less than 5.3%.
The continuous decline in gross profit margin might be one of the reasons for the stagnation of its profits.
From 2023 to 2025, Wanli Tires’ comprehensive gross profit margins stood at 17.60%, 15.03%, and 14.18%, respectively, declining by a cumulative 3.42 percentage points over the three-year period. The decline was even more pronounced in the all-steel radial tire segment, where gross profit margins fell from 9.7% in 2023 to 4.95% in 2025.
More noteworthy is Wanli Tires’ cost pass-through capability. Whether raw material prices rose or declined, the company’s gross margin remained under pressure, revealing underlying weaknesses on the product side.
Wanli Tires said that the direct reason for the decline in the gross profit margin of semi-steel tires in 2024 was that “customers were highly price-sensitive, preventing the company from fully passing on rising raw material costs to downstream customers.” By 2025, raw material prices had eased, but the company’s gross profit margin narrowed again as a result of “intensified market competition, with the decline in selling prices exceeding the decline in unit costs.”
This dilemma of “losing out whether costs rise or fall”—being unable to fully pass on cost increases when raw material prices climb, while still having to cut prices to compete for market share when costs decline—highlights a broader industry challenge: severe product homogenization and weak brand premium power. As a result, companies are forced to follow market pricing trends in price wars, with limited control over their own pricing power.
Wanli Tires’ gross profit margin consistently lagged behind its peers, trailing the industry average by 2.3 percentage points in 2023, 4.69 percentage points in 2024, and 3 percentage points in 2025.
Addressing its depressed profitability, Wanli Tires blamed the margin contraction on volatile raw material costs, shifting customer demographics, and fierce market competition. The company explained that its margin deficit relative to peers stems from competitors leveraging larger economies of scale and first-mover advantages in overseas production hubs, which grant them superior cost and tariff protections. Furthermore, while industry peers utilize integrated overseas distributor networks, Wanli Tires relies on third-party trading companies to manage international marketing and expansion, ultimately diluting its global pricing power.
Tire industry insider Zhao Zhiyuan noted that Wanli Tires’ stagnant profit growth epitomizes the structural contradictions plaguing the sector. Zhao highlighted that domestic tire capacity is severely oversupplied and low-end, homogenized competition remains fierce. While tier-one enterprises rely on high-margin overseas factories to subsidize their domestic operations, Wanli Tires’ overseas capacity will not come online until the end of 2026, meaning its global dividend period has yet to arrive. Consequently, until the industry undergoes significant capacity clearance, this structural disadvantage will be difficult to fundamentally alter.
Entering 2026, cost pressures on Wanli Tires continue to escalate. By June, natural rubber prices surged roughly 10% from the start of the year. Although tire manufacturers have recently implemented coordinated price hikes of 2% to 5% to offset these mounting expenses, it remains to be seen whether these marginal increases will be sufficient to fully absorb the rising cost of production.
Selling Expense Ratio Higher Than Peers
Wanli Tires partially blamed its low gross profit margin on its overseas trader model, claiming that third-party traders absorb the costs of terminal promotion and brand certification abroad. Under this logic, the company should theoretically spend far less on international channel development and marketing, resulting in a lower selling expense ratio than peers who independently expand overseas. However, the company’s financial data reveals the exact opposite outcome.
From 2023 to 2025, Wanli Tires’ selling expense ratios were 3.66%, 3.69%, and 3.55% respectively, whereas the average selling expense ratios of its peers stood at 3.07%, 3.1%, and 3.14% respectively, consistently tracking lower than those of Wanli Tires.
While claiming that overseas market promotion is funded by traders, the company’s selling expense ratio remains higher than its peers. This data contradiction has become a focal point of scrutiny in the prospectus. Y&T Intelligence sent an inquiry to Wanli Tires for clarification on this matter, but the company offered only a vague statement that its selling expense ratio does not differ significantly from its peers, failing to provide a direct explanation for the discrepancy between its operational model and its actual expenses.
In 2025, employee compensation consumed 30.91% of Wanli Tires’ selling expenses. This proportion sits significantly higher than that of its industry peers, indicating clear room for improvement in the per capita efficiency of the company’s sales personnel.
Investment banking insider Li Wei said that a higher selling expense ratio under a trader model typically indicates weak bargaining power over those traders. Li noted that if a product is highly competitive and the brand carries genuine market appeal, traders will naturally take the initiative to seek it out, minimizing the need for extensive sales personnel. Conversely, if an enterprise relies on a large sales force to chase scattered and minor business opportunities, its per capita human efficiency inevitably declines.
R&D Expense Ratio on Lower Side
Wanli Tires positions itself as an enterprise that “drives industrial upgrading through technological innovation,” claiming to have “mastered a series of core technologies for dedicated new energy vehicle tires.” However, the company’s R&D investment data contrasts sharply with this narrative.
From 2023 to 2025, Wanli Tires’ R&D expense ratios were 1.17%, 1.21%, and 1.05% respectively, whereas the industry averages for its peers stood at 2.91%, 3.01%, and 2.96% respectively. The company’s R&D investment is not only far lower than the industry average, but its further slide to 1.05% in 2025 marked a new low for the reporting period.
Facing questions over its low R&D investment, Wanli Tires blamed the gap on accounting scope differences. The company explained that a large volume of sellable products and mass-producible molds generated during its R&D process were transferred into main operating costs or fixed assets in accordance with accounting standards, rather than being fully reflected in R&D expenses.
According to Wanli Tires, if the R&D trial products carried over to operating costs/inventories and the costs of the first sets of R&D molds carried over to fixed assets were all factored back in, its adjusted R&D investment as a proportion of revenue from 2023 to 2025 would be 3.83%, 4.10%, and 3.93% respectively—a level basically equivalent to the industry average.
Regarding this explanation, accountant Wang Mingyuan noted that transferring R&D trial products to operating costs and molds to fixed assets is a relatively common accounting treatment across the manufacturing sector, meaning industry peers highly likely employ similar practices. Consequently, adjusting one’s own data independently without a unified scope offers limited comparative value.
Wang further pointed out that an R&D expense ratio of only around 1% is objectively low for manufacturing. He emphasized that while the tire industry is often perceived as traditional, continuous R&D investment is vital for critical areas like new material formulas, tread pattern designs, and smart manufacturing. Ultimately, maintaining a long-term low R&D expense ratio risks undermining the enterprise’s core competitiveness.
Counter-Cyclical Expansion of 17 Million Tires
Against a backdrop of strained profitability, weak R&D, and a down-cycle in industry prosperity, Wanli Tires has chosen to pursue a large-scale capacity expansion for its IPO.
The company intends to raise 2 billion yuan through this public offering, earmarking the proceeds to construct new projects in Cambodia and Malaysia, expand its existing Conghua production base, upgrade its R&D center, and replenish its working capital.
Of those allocations, the Cambodia project will add 6 million semi-steel tires, the Conghua Phase III expansion will add another 6 million tires, and the Malaysia project will add 5 million semi-steel tires and 1.2 million all-steel tires.
Combined, these three projects will inject 17 million units of new semi-steel tire capacity into the company’s production line. This represents a massive 56.7% expansion magnitude compared to its current existing capacity of 30 million tires.
Such a large-scale capacity expansion happens to coincide directly with a downward cycle in industry prosperity. In the first quarter of 2026, the performance of leading A-share semi-steel tire enterprises generally stagnated or declined.
Sailun Group (601058.SH) and Zhongce Rubber Group (603049.SH) saw their net profits grow by a meager 1.72% and 5.91% year-on-year respectively. Meanwhile, Shandong Linglong Tyre (601966.SH) and Qingdao Sentury Tire (002984.SH) experienced sharp contractions, with their net profits declining by 109.62% and 41.95% year-on-year respectively.
From a global market perspective, the lucrative dividend window for establishing overseas factories is also closing rapidly. Previously, leading domestic tire enterprises rushed to set up operations in Southeast Asia, leveraging local raw material cost advantages and tariff-evasion strategies to aggressively capture overseas markets.
Now, however, the Southeast Asian capacity of these top-tier enterprises has entered its peak release phase, triggering a substantial, industry-wide surge in global tire supply.
Zhao Zhiyuan said that “the window of opportunity for the tire industry to establish overseas factories is closing. Leading enterprises that positioned themselves a few years ago are already reaping those dividends. By the time all of Wanli Tires’ fundraising investment projects are completed and put into production, the competitive intensity of the global market will be far higher than it is now.”
Zhao added that, more crucially, Wanli Tires is relatively inexperienced in overseas operations. “Simultaneously operating multiple production bases domestically, in Cambodia, and in Malaysia poses a massive test to supply chain management, localized teams, and compliance and risk control capabilities. Whether its management capabilities can actually keep pace with the speed of this expansion remains to be seen.”