Kumho Tire doubles capacity, warehousing for U.S.

ATLANTA — Kumho Tire USA came into 2023 with aggressive expectations and the inventory to back them up.

The Atlanta-based subsidiary of South Korea's Kumho Tire Co. Inc. said it has doubled capacity for the U.S. market, added warehousing to improve speed and accessibility to dealers, and has been focused on "outside-the-box" marketing campaigns to grow the brand.

"Heading into this year, our expectations were aggressive," Shawn Denlein, president of sales and marketing at Kumho, said, "close to double-digit growth — and that still is our expectations."

Kumho ranked as the No. 17 largest tire maker in the world in the most recent Tire Business Global Tire Report, with $2.27 billion in tire sales in 2021.

In the last year, Kumho doubled annual capacity at its Vietnam plant to 10 million units and plans to raise that in 2024 to 12 million.

To support the added capacity, Kumho will open a Dallas warehouse this summer and plans to build one near the Port of New Orleans.

"It's been a struggle for everyone in the industry, but we've been doing pretty good," he said. "I think part of it is our fill rates are better now than they were at last year at this time, and also we also have good acceptance from the dealers for our program."

While shipping costs and disruptions have settled, elevated U.S. duties on tires imported from South Korea (21.7%) and Vietnam (11.8%) remain the biggest challenge for Kumho, Denlein said.

“Raw materials are down 10% with the trend moving forward to be stable," Denlein said, but added that the company hasn't gained because of the tariffs.

"The plant in the U.S. is roughly 3.2 million units annually, and then that will increase to 3.7 million next year," he said, "but the reality is that the plant is really geared toward original equipment. So, as our business is growing in the U.S., we knew there was a need for us to expand — and Vietnam was really the only choice we had."

Kumho doesn't foresee price increases this year, he said, adding there will be "more realignment" in the industry as prices from outside influences — like supply and materials caused by the pandemic — subside.

"The market took a tremendous amount of increase over the supply-chain issue and all of the costs. So, we saw a lot of price increases, on top of price increases," Denlein said. "I would expect to see more realignment throughout the year in certain segments and sizes."

The Denver Nuggets just claimed the NBA championship trophy, capping a successful season for both the league and Kumho, an official league partner since 2014.

"We utilize the social media platforms — create video content. Every year, we reach millions of consumers that may not be automotive enthusiasts that end up following us on our social media platforms."

The most popular feature is the "Kumho Handles" campaign, which feature NBA dribbling ("handles") highlights that play on the theme of control — like a Kumho tire. The campaign generates more than 50 million views each session, he said.

"Kumho's target audience is 18 to 35, and the NBA has one of the youngest sports fanbases, so it kind of falls right in line with what we're doing," Denlein said. "From the dealer side, we have hospitality packages, tickets and then suite nights, and also we bring a group of dealers out to NBA All-Star Weekend.

"So, all of that together, it has worked out really good for us."

For years, he said, Kumho has sought to increase consumer engagement through its marketing efforts. This means regularly providing new content to its social media channels.

"We've developed a sort of outside-the-box strategy using memes, and we've been very successful with it. We boosted, roughly, 400% of followers in the last two years."

Kumho also has created an influence-marketing strategy to increase "word-of-mouth" through a number of social-media influencers.

"They put the product on their social platforms, and they have their followers, and it really sends a message that our brand is high quality."

The next initiative, he said, is to get back into motorsports. He said the "road is wide open" for how they decide to approach it.

"Consumers know Kumho makes a good, high-quality product, but we want to take the track and the off-road and combine everything together and really send a message of 'quality products, high-performance company,'" Denlein said.

Because Kumho doubled capacity in Vietnam, there was a big need for additional warehouse space in the U.S.

"The general rule here is to try to get more warehousing to bring more product in to serve the customers more efficiently," he said.

The Dallas warehouse that was to have opened already is delayed because of permitting, but he said it should open later this summer.

"Right now, our warehousing is really the West Coast (California) and East Coast (Georgia), so to better serve that Midwest central region, the Dallas warehouse will provide a lot of relief."

He said Dallas will mean shorter lead times, better inventory "and really just getting the products to our customers faster."

Louisiana, he said, is similar to Dallas with the aim of adding more product into the U.S., but it also will be at the port. The firm plans to open by 2026 a 350,000-sq.-ft. warehouse in Franklin, La., capable of holding up to 470,000 tires.

A surprise in the growing electric vehicle (EV) industry, Denlein said, is EV customers are still using non-EV tires despite the push from manufacturers to create EV lineups.

"From an OE standpoint, we're utilizing what you could call ICE-vehicle tires and developing EV-modified versions that align with the performance issues the EV requires," he said. "On the replacement side, we are moving in the same direction.

"We'll continue in this particular direction to have product available in the necessary fitments, and we're going to continue to modify the segment and look at it to see where it goes and determine whether we actually need a dedicated product line for the portfolio."

Denlein said airless tires are an emerging technology to keep an eye on.

"The successful implementation of airless tires would be a game-changer," he said. "There's still some issues that need to be overcome with rolling resistance and heat generation with high-speed and high-load applications with airless technology, but that would be one to keep an eye on, and one we are in the process of developing."

Another emerging trend is the all-weather touring tire segment.

"It's growing every year — 32% the last three years and expected to grow 24% in a market that's currently down."

He said Kumho is seeing all-weather tire demand in states like California, Florida, Georgia and Texas.

"The all-weather is not only pulling from winter segments, but also lower touring segments, like T-rating and broad-market tires," he said.

"The way it's being marketed — it used to be, 'I'll use all-weather because I have snow,' but now we talk about rain and how the message is being sent out. That's why, I think, you see it in these particular states."

Kumho's associate dealer program is strong, he said, with one of the highest pay-outs in the industry.

"It's a way to support the distributors, and if you collectively add up that program, it becomes one of your largest programs. We still are dominated by the independent tire dealer — so if you look at it that becomes one of your most important customers, just under the branch of a lot of customers."