Hankook planning 30% capacity growth by 2020

SEOUL, South Korea (Oct. 27, 2016) — Hankook Tire Co. Ltd. has plans to expand its global manufacturing capacity more than 30 percent by 2020, company officials said last week in Seoul.

To that end, the company is considering five locations for a new plant, potentially Mexico, Brazil, Middle East, East Europe and Russia, the officials said.

This would be in addition to the plant Hankook has built in Clarksville, Tenn., and plans to have in commercial operation by April 2017, slightly later than originally projected.

Currently in its trial stage, the facility is designed to produce roughly 5.5 million tires a year in Phase I, mainly as OE tires to be supplied to the Mercedes-Benz and BMW car assembly sites in nearby states.

“We are currently supplying those plants from Europe,” said Felix Kinzer head of corporate communications, Hankook Europe.

Once on stream, the U.S. plant will free up capacity in Europe while providing further opportunity for growth within the Americas market.

Hankook projects that the Clarksville plant will be expanded into Phases II and III in the future to meet the demands of the market.

This plant, budgeted at $800 million, will be a major contributor to the company's ambitions to grow into one of the top five global tire makers, according to Seung Bin Lim, global marketing vice president.

To accommodate growth, Hankook envisions expanding its collective production capacity to 135 million units a year by 2020, from 103 million units presently.

As for a new plant, the prime candidate, Mr. Kinzer said, would be the plant in Hungary which has room for further expansion. If that is the case, the added capacity mostly would be focused on the light and medium truck radial segments, he added.

These two segments account for only about 5 percent of Hankook's production each, a figure Hankook is keen on increasing.

Hankook also is looking at demand for tires for vehicles with alternative power sources.

“…We are now observing a change by auto makers to eco-friendly cars like hybrid or electrical vehicles,” said Bryan Woo, senior vice-president and head of global OE division.

The company is now developing and producing tires for this segment, which requires further development of new materials and technologies.

Another key market Hankook is aiming to see improvement in is the SUV market, which has had a steady growth globally.

“The SUV market is now growing explosively, particularly in the Chinese market and the European market…. We are now working on partnerships with SUV-makers, such as Porsche Macan and BMW X5 and X6,” he added.

The South Korean tire-maker has been investing in marketing of its tires as a premium brand, focusing on football in Europe and baseball in the U.S. and Asia.

The marketing budget of the tire maker has grown to 4 percent of revenue this year from 3.5 percent in 2015, he said, and the figure is projected to grow to 4.4 percent next year.

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Shahrzad Pourriahi is a reporter with European Rubber Journal, a U.K.-based sister publication of Tire Busienss.