Kumho Tire plans to invest more than 1 trillion won to build its inaugural factory in Europe by 2027. The company intends to evaluate incentives and tax benefits pledged by four countries -- Romania, Serbia, Portugal, and Turkey -- including the size of subsidies, before finalizing the factory’s location by the end of this year.
Kumho Tire CEO Jung Il-taik met with reporters on March 15 and stated, “Considering factors such as the rise in logistics expenses due to the Red Sea crisis, we have decided to establish a European-based factory,” further stating, “We aim to begin construction next year and have it finalized by 2027.” Kumho Tire presently runs eight factories across four nations, encompassing South Korea, China, the United States, and Vietnam.
Tires supplied to European car manufacturers like Volkswagen and Peugeot are indeed being transported by ship from the factory in Vietnam.
Kumho Tire plans to secure new customers such as Mercedes-Benz after constructing its European factory with an annual capacity of 12 million units.
After its acquisition by Doublestar in China in 2018 due to management challenges within Kumho Asiana Group, Kumho Tire rebounded to profitability in 2022 and achieved its highest-ever operating profit last year, amounting to 411 billion won (US$309 million).
Last year, the company obtained 23.8 percent, or 963.9 billion won, of its sales from the European market, reaching a total of 4.41 trillion won. Most of these sales were generated from replacement tires. However, the portion of original equipment tires provided to manufacturers such as Volkswagen and Peugeot amounted to less than 25 percent. Without a local factory, attracting European car manufacturers as “loyal customers” proved to be challenging. Currently, European orders are met by shipping products manufactured in Vietnam, where sourcing raw materials like natural rubber is more feasible.
With the onset of the “Red Sea crisis” last year, the situation indeed experienced a rapid change. Due to the blockage of the Suez Canal, ships had to detour around the Cape of Good Hope at the southernmost part of Africa. This led to a more than 10 percent surge in logistics expenses and an extension of transportation times by about two weeks. Kumho Tire CEO Jung Il-taik explained, “Recent geopolitical instability has led to requests for new factories from European car companies, including the top three German automakers -- Mercedes-Benz, BMW, Audi -- which also influenced the decision to establish the European factory.”
Kumho Tire plans to initiate construction of its European factory early next year, aiming for full-scale production to commence by 2027. The facility will have the capacity to manufacture 12 million tires annually, including those designated for the premium electric vehicle brand Inovu. Upon operation, Kumho Tire’s annual production capacity will soar to 74 million tires. The European factory will adhere to the “RE100” standard mandated by the European Union (EU), necessitating the utilization of 100 percent renewable energy sources. The 1 trillion won investment required for establishing the factory will be collectively financed by Kumho Tire and its major shareholder, Doublestar.
According to the market research firm Future Market Insights, the European tire market is projected to reach US$108.7 billion by 2033, indicating growth from last year’s US$68.4 billion at an average annual rate of 4.8 percent. In response to this growth, both Hankook Tire and Nexen Tire are intensifying their efforts to expand into the European market. Hankook Tire is investing 758.9 billion won in its Hungarian factory, which currently produces 17 million tires annually, to establish new production lines for truck and bus tires (TBR) by 2027. Nexen Tire, on the other hand, has recently increased the production capacity of its Czech factory from 5.5 million to 10 million tires annually.