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Opting Not to Mark Up Product Prices for Two Years in a Row
Korean Tire Manufacturers
Opting Not to Mark Up Product Prices for Two Years in a Row
  • By matthew
  • August 21, 2013, 02:39
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Local tire manufacturers have frozen the prices of their products for the second consecutive year to improve their profitability, as the price of natural rubber has fallen. 

According to industry sources, Hankook Tire, Kumho Tire, and Nexen Tire have decided not to mark up the prices of their products used in general passenger cars this year. “The prices of some of the items sold in the T-Stations have slightly risen compared to last year,” said Hankook Tire, adding, “However, this is because the margin of the retail shops has been added to the factory prices to change the price marks and show the actual prices.”

The price freeze is attributed mainly to the decline in the price of raw materials. The international price of natural rubber dropped from US$4,000 or US$5,000 to US$2,000 a ton between January and July this year. Natural rubber accounts for at least 25% of tire manufacturing costs. 

The decreased production costs have been a boon to manufacturer profitability. The operating profit ratio of Hankook Tire was 14.5% in the second quarter of this year. Those of Kumho and Nexen Tires rose to 10.2% and 10.3% during the same period, respectively. 

Back in 2011, the tire price had increased by 5% on average. At that time, the natural rubber price amounted to US$5,500 per ton. “Approximately the same raw material price is applied to all three manufacturers, and this is why the prices of their products move in the same direction,” said an industry insider, continuing, “Some people are saying that the companies are engaged in price fixing, but it is wrong to say so.”

In the meantime, foreign tire manufacturers are expected to raise the prices of their products within the year, as they are refining their product quality to narrow the gap with their Korean counterparts.