Tiremakers Compete for Chinese Market - Tire Review Magazine

Tiremakers Compete for Chinese Market

(Akron/Tire Review – China People’s Daily) The biggest project to be invested in by a business from the Republic of Korea in Northeast China's Jilin Province has begun construction in the Changchun High-tech Industrial Development Zone, according to the province's department of commerce.

With a total investment of US$155.87 million, the project, Kumho Tyres (Changchun) Co. Ltd., is designed with an annual output capacity of 3.15 million car radial tyres, filling the gap for high quality car tyres in Jilin Province.

Its targeted output capacity is expected to be realized in 2008 when the company becomes the biggest tyremaker in Northeast China.

Kumho Tyres from the Republic of Korea ( ROK ) is the investor of the tyre project currently under construction.

Kumho Tyres, affiliated with Kumho Asiana Group, has assets worth 250 billion yuan (US$31.25 billion), and 5,092 staff.

It notched up US$800 million in sales revenue in 2003, making it the ninth largest tyremaker in the world.

With global demand for tyres growing and domestic production costs rising, Kumho Tyres has sped up its overseas expansion.

The company has already established two tyre plants in Nanjing and Tianjin , which currently produce 12 million and 5.25 million tyres per year respectively.

The combined output of tyres from the two plants is expected to reach 18.5 million in 2009, while still leaving open the supply of 10.7 million tyres.

Based on a market research, the demand for Kumho tyres in the Chinese market is estimated to soon hit 29.2 million.

The research also found that the supply for high-quality radial tyres is short, while there exists a huge market for that product.

So, establishing a new plant to satisfy market demand became a pressing issue for Kumho Tyres.

Though the ROK-based company has chalked up impressive market shares in South China, it did not enter into its venture in Northeast China until the new tyre project was settled there.

Northeast China is seen as a traditional industrial base and therefore has won the popularity of investors involved in manufacturing industries from home and abroad.

A number of cities in the region including Changchun, Harbin, Shenyang and Jilin City are all comparatively strong in auto making.

Especially Changchun, the biggest auto manufacturing base in China, aims to become one of the world’s biggest auto cities, marked by an annual output of more than 1 million automobiles.

The city plans to produce up to 1.2 million vehicles, and export 60,000 vehicles in 2010.

The output value of the city’s auto industry is expected to exceed 28.7 billion euros (US$36.4 billion) by that time.

The State-level Changchun High-tech Industrial Development Zone is a key area for developing the auto industry of the city.

Around two-thirds of the auto and component makers in the city are clustered there. The output value of the zone accounts for two-thirds of Changchun’s total.

As Jilin Province is adjacent to the Republic of Korea, the two sides have a long history in economic exchanges.

And promoting co-operation between local and ROK companies has long been one of the main tasks of local authorities.

Both Wang Yunkun, secretary of Jilin Provincial Committee of the Communist Party of China , and Wang Min, governor of the province, have met top executives of Kumho Asiana Group, introducing the province’s investment policies.

Meanwhile, the group company has paid close attention to China’s auto industry development and showed great interest in investments in Northeast China.

In the past year, company officials have paid several business tours around Jilin Province and made an in-depth research on the investment environment of the province.

Attracted by a well-established industrial base and a favourable investment environment, Kumho eventually decided upon its new investment location in Changchun.

During the first China Jilin Northeast Asia Investment and Trade Exposition held last year, Kumho Tyres clinched an investment agreement with the Changchun High-tech Industrial Development Zone.

The project, covering an area of 230,000 square metres, is expected to advance Kumho’s expansion into the Chinese market.

On the other hand, it will also push forward the growth of the auto industry of Jilin Province, and promote the revitalization of the traditional industrial bases in Northeast China.

Official statistics show that China’s tyre output accounts for around 9 per cent of the world’s total output.

Sales revenues from China’s tyre industry reached 79.4 billion yuan (US$9.9 billion) in 2004, an increase of about 38 per cent compared with the previous year.

And the top nine joint ventures involved in making tyres contributed an estimated 60 million tyres.

That is why a number of overseas tyre makers such as Bridgestone, Michelin, Goodyear, Yokohama Rubber, Sumitomo and Kumho Tyres, are competing to shift their operations to the fast-growing market.

So far, Kumho Tyres has signed a letter of intention with the First Automobile Works, providing the latter with tyres.

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