Mexico evolving into Top 5 tire-producing nation

AKRON — Mexico, si!

From a low point 20-plus years ago when Continental A.G. and Goodyear were in the process of closing factories in Mexico and Mexico's sole domestic tire maker Tornel was struggling financially, the republic south of the U.S. is now on its way to becoming one of the five largest tire-producing nations on earth.

Three projects disclosed in the past six months — by Yokohama Rubber Co. Ltd. and China's Sailun Group and ZC Rubber Group — represent over $1 billion in capital investment and in excess of 24 million passenger/light truck tires a year.

These new factories are in addition to three other plants opened in the past decade — by Goodyear, Group Michelin and Pirelli & C. S.p.A. — that represent over 20 million consumer tires annually and coincide with Mexico's emergence as a major U.S. trading partner in the tire sector.

Overall, the Mexican tire industry's rated capacity stands at over 65 million passenger/light truck tires a year and 1 million to 2 million truck/bus tires a year, according to data from the Global Tire Report, published annually by Tire Business/Crain Communications Inc.

The new capacity being built represents a 35%-plus increase in capacity for consumer tires in Mexico, which already is the No. 2 source of imported passenger tires and No. 5 among nations exporting light truck tires to the U.S., according to U.S. Census Bureau data.

In 2023, the U.S. imported 22.8 million passenger and 1.79 million light truck tires from Mexico, valued at over $2 billion. Those numbers account for 14% of passenger tire imports and 5% of light truck shipments from abroad.

While Mexico's rubber industry trade group, the Camara Nacional de la Industria Hulera (CNIH), does not publish production or shipment figures, it is believed Mexico's six tire companies — subsidiaries of Bridgestone Corp., Continental A.G., Goodyear/Cooper, Group Michelin, JK Tyre (Tornel) and Pirelli & C. S.p.A. — have combined manufacturing capacity of more than 60 million passenger/light truck tires annually.

If those companies are operating at, say 80% efficiency, exports to the U.S. would represents roughly 35% to 40% of their output.

Once the new plants are onstream, one would expect the bulk of their output to be exported to the U.S., based on comments the three tire makers have made regarding those factories. That could push U.S. imports from Mexico toward the 40 million unit mark.

Each company planning to build new factories in Mexico stressed the proximity of Mexico as a manufacturing base in helping them service their U.S. dealer networks.

"This expansion represents a significant investment in our future and reaffirms our commitment to providing top quality tires for the North American market and allows us to continue to diversify our product offerings," Peter Koszo, president of Sailun Group of Companies in North America, said at the groundbreaking for the plant earlier this year.

Qingdao, China-based Sailun supplies the U.S. market principally from factories in Vietnam and Cambodia the past several years after the U.S. imposed elevated import duties on passenger tires from China.

Sailun's business in North America is handled through Sailun Tire Americas of Brampton, Ontario. TBC Corp. is the exclusive distributor of the Sailun Tires brand in the U.S. market.

Similarly, Stan Chandgie, Yokohama Tire Corp. COO and executive vice president, said the new Mexico plant "represents additional capacity for a region that is hungry for it.

"Our new plant underscores our unwavering commitment to North American market partners, enabling us to respond swiftly to local demands and ensure prompt delivery to our valued partners across the region."

YRC has talked about Mexico as a potential manufacturing site since 2016. North America accounts for 26%, or $1.62 billion, of YRC's global tire-related sales revenue.

For Hangzhou, China-based ZC Rubber, opening a plant in Mexico will benefit both the North American and Latin American markets, "providing customers with more efficient and high-quality products and services."

The plant will include a warehouse center that will enhance logistics and service, "ensuring that ZC Rubber can deliver products more swiftly and reliably to customers throughout the Americas, further strengthening the company's supply chain and customer service."

One also would expect shipments from other countries where these companies source at least some of their product for the U.S. — China, Thailand, Vietnam, Philippines, etc. — to decline to a degree.

None of the companies has commented on labor costs in Mexico versus the U.S., but a study by IVEMSA S.A. de C.V reveals a "fully burdened" —including paid time off, profit sharing, bonuses, etc. — direct employee costs $5.30 an hour in Mexico versus $23 an hour in the U.S., plus benefits.

In addition, the typical "legal" workweek in Mexico is 48 hours.

IVEMSA describes itself as a "comprehensive administrative services provider" with a 35-plus year track record of supporting foreign companies' manufacturing operations in Mexico.

Companies would expect to have lower transportation/shipping costs.

Also worth noting: Mexico has approved the imposition of antidumping duties on passenger and light truck tires produced in China ranging up to 32.24%.

The decision follows a petition, filed in November 2022 by Bridgestone de México, Compañía Hulera Tornel, Continental Tire de México and Industrias Michelin, Mexico's Interior Ministry disclosed April 5.

The duties cover pneumatic radial tires with rim diameters 13 to 22 inches and with aspect ratios of 35 to 85, the announcement said.

A majority of the Chinese tire makers — including ZC Rubber, Firemax, Nexen, Prinx Chengshan, Giti Tire, Qingdao Doublestar and the Chinese subsidiaries of Hankook Tire & Technology Co. Ltd. and Kumho Tire Co. Inc. — have been given margins of 21.77%.