Over the past couple of years, South Korea’s Nexen Tire Co. has enjoyed a growth rate of more than 200% in China, and the tiremaker expects this year’s results to be no different.
The main reason for the positive appraisal is the numerous OE supply agreements the company recently finalized in China.
Since the start of 2011, the Verna model range produced by Beijing Hyundai Motor Co., the Chinese subsidiary of the Hyundai Motor Co., has been fitted with Nexen tires. And early in the second half of the year Nexen began supplying tires to Chinese vehicle manufacturer Anhui Jianghuai Automobile Co., a company that in 2010 sold some 460,000 vehicles, mostly in the domestic market.
Adding to these two agreements are supply contracts due to get underway next year. As of 2012, Nexen will supply tires to further Beijing Hyundai models and will also begin OE supply to Dongfeng Yueda Kia, a joint venture company operated by Dongfeng Motor Corp., Kia Motors and the Yueda Group. Thus, next year a further four vehicle models sold in China will be equipped with Nexen tires.
In announcing these new deals, Nexen commented that its rapid Chinese market growth can also be attributed to the ongoing development of its portfolio there and the introduction of products that meet the needs of Chinese customers. The South Korean manufacturer, perhaps in light of issues some of its compatriots have faced in China, also stated that sales figures reflect the attention it pays to quality control. In 2010, Nexen sold 1.1 million tires in China.
In Nexen’s view, China has developed into an increasingly interesting market for the entire automotive industry. The South Korean manufacturer has been active in China since establishing a subsidiary, Qingdao Nexen Yuntae Inc., in 2005. Following a five-year planning period the foundation stone for Nexen’s new factory in Qingdao, Shandong Province, was laid in May 2006, and production of passenger car and light commercial vehicle tires commenced in January 2008. Today 1,100 workers are employed at the 1,635,000-square-meter site, which in addition to a factory also houses a research and development center.
Management at Nexen state they are particularly proud that the Chinese subsidiary was operating in the black within three years of production commencing. In 2010, more than 70% of Nexen’s production at Qingdao was exported to more than 130 countries around the world. That said, Chinese market demand continues to grow and to accommodate this Nexen intends to expand the Qingdao plant in the next few years. “Capacity should increase from current levels of six million units per year to eight million,” commented Jae Soo Lee, senior managing director and general manager of corporations for Nexen in China.
Further plans involve continued investment in China until 2017 in order to give the tiremaker a 20 million unit per annum production capacity there. At this time the Chinese plant, along with the tiremaker’s South Korea-based factories (its original factory in Yangsan and its new factory in Changnyeong, South Korea, which will start production next year) will enable Nexen to produce 60 million tires a year. (Tyres & Accessories)
