Kumho Tire : gains momentum in its strategy to capture the largest tire market in the world through re

Title	Kumho Tire gains momentum in its strategy to capture the largest tire market in the world through re
Date	2014.07.08
Kumho Tire gains momentum in its strategy to capture the largest tire market in the world through recommencing of the construction of manufacturing plant in Georgia, USA ▶Recommencement of construction of the manufacturing plant in Georgia, USA with total investment of approximately US$ 413 million and annual production capacity of approximately 4 million units ▶Increase in sales of high value added products such as UHP and expansion of the original equipment (OE for new vehicles) business are anticipated in the North American Market through manufacturing in the USA. Kumho Tire (CEO Kim Chang Kyu) announced on the 1st recommencement of the construction of the manufacturing plant in Georgia, USA with the approval of the investment by the creditors and that the company will be spurring on with its strategy to capture the North American market, the largest tire market in the world. Kumho Tire, in consideration of such market situations, is pursuing the construction of manufacturing plant with the annual capacity to produce approximately 4 million units by investing approximately US$ 413 million in Macon in the State of Georgia with the target of completing the construction early 2016. The entire quantity of the tires manufactured in Georgia will be supplied as OE tires. When the manufacturing plant in the USA is completed, the total overseas manufacturing capacity of the company will exceed that of manufacturing capacity in korea. The construction of the manufacturing plant in the USA was temporarily ceased due to the global financial crisis following its commencement in 2008 and is being restarted after 7 years. Production of tires is scheduled to start early 2016. The entire global tire market is estimated at 1.6 billion a year with the North American market accounting for approximately 20%. In particular, the North American market is an important premium market in the world, and the construction of a manufacturing base in North America makes the establishment of partnership with completed vehicle companies easier from the perspective of expansion of OE supply. Moreover, there is a cluster of global automakers in the southern region of the USA, new Mecca of automobile, which offers the repurchasing effect of the replacement market through stable supply of the products. In particular, the manufacturing plant of Kumho Tire in the USA is in close vicinity of the manufacturing plant of Hyundai Motors in Alabama (296km) and the manufacturing plant of Kia Motors in Georgia (177km). According to the Rubber Manufacturer's Association (RMA) of the USA, with the anticipation of economic recovery in the USA, the tire market in the North America is forecasted to achieve compound annual growth rate (CAGR) in the 5% range from 2013 to 2018. Economic recovery in the USA and the increase in the demand for OE, as affirmative factors, are anticipated to provide the momentum for recommencement of the construction of the manufacturing plant in the USA. In addition, it is expected that Kumho Tire would be better positioned to stably supply the OE demand by completed auto manufacturers including Hyundai / Kia Motors in the North American market through the construction of the local manufacturing plant. The global BIG 3 in tire manufacturing are also taking aggressive steps by taking assertive measures towards the market demand by establishing manufacturing bases through continuous investment into the North American market. Global tire manufacturers are diversifying their manufacturing bases in order to reduce the cost of manufacturing and distribution, cope with the local demands and to promptly respond to the changes in the international trading environment in each of the regions. Moreover, the global tire manufacturers are continually investing in construction of manufacturing bases since the capabilities and scale of manufacturing facilities could be the most fundamental competitiveness of the tire manufacturers. Cho Jung Seok, the executive director in charge of strategic planning, stated that, "the North American market is a strategic market that accounts for approximately more than 20% of the total sales of Kumho Tire and the construction of the manufacturing plant in Georgia is predicted to quickly elevate the market status of Kumho Tire in the American market in the future, and that, "as we are continuously expanding our tires supply to the premium end of the completed vehicle range with the North American market as the basis, we expect that our profitability will also be enhanced considerably.