LS Mtron, ltd., a subsidiary company of LS Group specializing in industrial machinery and high-tech parts, aggressively leaves its unique footprint on the overseas market.
The company recently held a ground breaking ceremony in Qingdao City, China, on October 30 for a new tractor factory with an investment of 30 billion won.
Approximately 200 participants, including Shim Jae-seol, the president of LS Mtron, and the city’s officials attended the ceremony. The company is building the factory in order to strengthen its competitiveness in the global market and penetrate the Chinese tractor market which is valued at approximately 20 trillion won.
The planned factory in Qingdao, China, is expected to manufacture 20,000 units a year and will serve as a platform for the company to become a global leader in tractor production in China, where more than 220,000 tractors are produced annually. The Chinese agricultural machinery industry is showing fourfold growth compared to 2004 due to the government’s various agricultural policies, such as a rural policy to narrow the growing income disparity between the rural and urban areas, mechanization of farmland for food security, and supporting policies to help farmers returning from the cities due to the economic recession.
Although the tractor industry is growing, domestic makers such as Foton, Yituo, and Yueda are vulnerable because of their low quality products, while overseas companies face different issues, such as establishing a stable distributing network and warranty and repair problem. Hence, global tractor makers like John Deere, CNH, and Kubota Tractor are trying to carve out a niche market in the Chinese tractor market with their own knowhow and strategies, and therefore competition among these firms is expected to be fierce.
LS Mtron, however, maintains an intrepid attitude since ‘product accessibility’ is not arduous for customers because LS Mtron mainly produces (51%) 51-100 hp tractors whilst Japanese makers focuses on tractors under 35hp, and European firms concentrate on tractors over 100hp. Moreover, the firm expects to achieve ‘product differentiation’ because their tractors are already verified in the Korea market.
The company categorizes their products at ‘high-quality’ and ‘high-performance’, thus the ‘high-end’ market is their immediate target, as well as the northeastern three provinces geographically. The marketing plan will eventually target the whole Chinese continent, including the Huabei and Chang Jiang areas where 85% of mediate and heavy tractors are marketed.
The firm, furthermore, recently received a $120 million order to supply its eco-friendly CAC (Charged Air Cooler) hose, a pipe that connects the inter cooler with the turbosupercharger and throttle valve in order to drive the engine, to five different cars of General Motors, including the Winstorm, until 2016.
The CAC hose, a newly developed product that uses eco-friendly fluorine and silicon as well as adhesive technology for heterogeneous materials and Non-wrapping crosslinking technology, is expected to be popular in the world auto market due to its compatibility with the Euro V standard to gauge the displacement. They thus plan to saturate the premium auto market which includes BMW and Benz under strategic cooperation with leading corporations in Germany.
The company also established a high-volume manufacturing system by developing the Tandem line production process, the latest extruding method never before successfully achieved in South Korea. By doing so, it enables an expansionary application of the CAC hose to a gasoline car, which was only available for the diesel engine before. The firm expects to witness a rapid elevation in demand, and achieve the economies of scale up to 80% by boosting productivity by 30% under the new production system.
“We finally became the main supplier of a new product that is suitable to a new trend in the auto market on the basis of it being both highly-efficient and eco-friendly to GM, one of the most prominent car makers in the world,” said Hu Chan-kyu, Head of the Department of Auto Parts. “We now plan to occupy 30% of the overseas market by targeting the US and Europe with our own distinguished products,” Hu added.