Deauto Bet on Diversification

Deauto

Deauto Recycle & Retread Industry Sdn Bhd has committed itself to a strategy of diversification as the retread environment continues to prove to be a complex battleground.

Selangor Retreader Looks for New Business Opportunities

Managing Director Dato Lim Choon Seng explained, “we are continuously looking for other types of business to spread the risk from our retread operation. For example, we have been investigating the viability of the property market.

“The difficulty with retreading in Malaysia for operators like ourselves is the price war amongst retreaders in Malaysia that tends to come from many end users preferring to purchase a cheap new tyre on price.”

Deauto Recycle & Retread Industry Sdn Bhd is a retreading and recycling operation located in Telok Panglima Garang in Selangor. The business had been active for five years when Lim Choon Seng started the retread factory following changes in the casing import licensing.

“I worked for 15 years as a casings wholesaler and 5 years with Kit Loong (Commercial Tyre), but once the import licensing changed regarding the importation of casings, we were obliged by the regulations to have our own factory. This led to the initiation of our retread business,” Choon Seng stated.

In the last five years, Deauto has developed into an operation that boasts 21 members of staff with 13 working in production, 4 in the office and the final 4 fulfilling duties in logistics and marketing.

“We have a team of 21 workers today and are planning to add to that with two drivers,” explained Choon Seng. “The plan is for these drivers to operate the two trucks we will be buying to collect stock retreads and customer-owned casings. This is all with the objective of aiding us to cover the south and east coast of Malaysia better.”

As of today, Deauto Recycle & Retread Industry Sdn Bhd are producing between 1,500 to 1,800 pre-cure retreads per month in the TBR and light truck segments for both on and off-road applications for long and short haul journeys. This output presently covers Central, Northern and the East Coast of Peninsula Malaysia.

Choon Seng explains, “we fluctuate on a monthly basis between 1,500 and 1,800 retreads. This represents approximately 60% of our production capacity, thus showing our room to grow using the resources we already have available. We are already very strong in the north and West Malaysia, but undoubtedly would like to strengthen our position.”

This production is supported by one fourteen-hour shift that begins at 6am and finishes at 8pm that sees Deauto utilise two autoclaves with capacity for 16 and 12 tyres respectively.

Furthermore, Choon Seng disclosed that the casings that supply the production are about ‘60% stock retreads and the remaining 40% customer-owned casings’. These casings are mostly well-known brands such as Bridgestone, Toyo and Yokohama, imported from Japan due to the high levels of retreadability.

“We want to see our volume gradually increase so that we can plan accordingly. We are currently renting out additional space in Malaysia which is sizeably larger than our facilities at this point in time. Therefore, if demand surges we will be able to react appropriately and grow.”

The products produced by Deauto are enabled by three separate tread manufacturers: Maxrubber, Eversafe and Sun Rubber with the majority of the production being Eversafe.

“We normally recommend the pattern that works best for that client according to their application, whether its long or short haul, but the majority of what we produce is with Eversafe.

Apart from the retreads, Deauto has ventured into selling new TBR tyres, which they import. A natural question would be to wonder if there are plans to provide a complete service. Choon Seng soon gave us some insight into the retreader’s plans.

“We only provide tyres at this stage. However, plans are underway to provide an outdoor breakdown service, which we plan to launch in January to cover Peninsular Malaysia whilst outsourcing to external providers in other parts of the country.

“Despite our plans it is difficult to find the staff with us requiring 2-3 employees that are driving light-trucks at any one time to deliver the service.”

As the name Deauto Recycle & Retread Industry Sdn Bhd suggests, the company offers a recycling operation as well through their monthly collections of 3,000 to 4,000 pieces of domestic tyres. This produces approximately 200 tonnes of recycled rubber.

Choon Seng laid out the recycling operation for us, “our recycling plant was operational at exactly the same time as the retread plant. We recycle somewhere in the region of 3,000 to 4,000 pieces per month. The process leaves us with about 70% rubber and 30% steel from each tyre.

“The steel is normally sold to local manufacturers and the rubber to a variety of clients as we produce rubber crumb in a few sizes. 1-5mm, 16-20mm and 20-40mm.”

As talk moved to investments Choon Seng was keen to point out that Deauto were not looking to invest in state-of-the-art improvements.

“At this point, it’s difficult to justify investing in our current operations for a number of reasons. Firstly, we are very happy with the current machinery and tools at our disposal, but also additional in a market that is so heavily impacted by Chinese tyres, we really don’t think it would be a prudent option.

“With the Malaysian market getting harder and harder with smaller retreaders emerging and lower quality new tyres affecting our market share, it is a difficult moment to consider investment.”

On the possibility of offering passenger retreads, Choon Seng highlighted the complexities behind providing this product.

“Passenger retreads are incredibly complex. This is mostly down to the fact that you need to stock such a high variety of sizes, making it very complicated to provide a thorough service rendering to make it worthwhile.”

About the author

Richard Wilson is a correspondent for Retreading Business. Since 2015, Richard has worked as a correspondent for all of the titles across the Valebridge Publications Ltd Group namely: Commercial Tyre Business, Tyre & Rubber Recycling, The Tyreman and Truck and Bus News. Richard has worked on/off from the age of 16 for the company and whilst gaining a Bachelor's Degree in Spanish and Business Studies at Coventry University, he developed his writing skills at the University paper and more recently writing his own independent blog.

Contact: richardjwilson@btconnect.com

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