Key Points:
- Kumho Tire Co. plans to invest over $750 million in its first European plant by 2027. The decision comes amid the shipment crisis and increased demand.
- The new plant will align with the RE100 initiative, operating solely on renewable energy sources to meet sustainability standards.
- Kumho’s strategic shift from a defensive to an aggressive stance reflects its ambition to capitalize on the fast-growing European tire market.
- South Korean tire rivals like Hankook Tire & Technology Co. and Nexen Tire Corp. are also expanding production capacities to meet the growing demand in Europe.
Kumho Tire Co., South Korea’s second-largest tire manufacturer, announced plans to invest over 1 trillion won ($750.8 million) by 2027 in constructing its inaugural plant in Europe. This strategic move aims to meet the escalating demand for tires from major automakers like Mercedes-Benz AG and BMW, particularly amidst the challenges posed by the Red Sea shipping crisis.
The company is evaluating potential plant locations, including Romania, Serbia, Portugal, and Turkey, to finalize the site selection process by the end of the year. Kumho’s decision to establish a production facility in Europe comes in response to disruptions in tire shipments caused by attacks on vessels entering the Red Sea, leading to increased freight costs and delays in delivery times.
Jung Iltaik, President and CEO of Kumho Tire, highlighted the growing demand for original equipment (OE) tires in Europe, where the company generated nearly a quarter of its total sales revenue last year. With an annual capacity of 12 million units, the new plant is expected to cater to premium European automakers and manufacture high-end models, including those designed for electric vehicles.
Moreover, Kumho aims to align the factory’s operations with the RE100 initiative mandated by the European Union, ensuring the use of renewable energy sources to meet sustainability standards. The company plans to commence construction next year and target commercial production 2027.
Kumho’s investment plans underscore its strategic shift towards a more proactive stance, moving away from a historically defensive position. The move reflects the company’s ambition to capitalize on the fast-growing European tire market, projected to reach $108.7 billion by 2033.
In the broader context, Kumho’s expansion initiative aligns with similar endeavors by its South Korean counterparts in response to the growing demand in the European market. Competitors like Hankook Tire & Technology Co. and Nexen Tire Corp. are ramping up their production capacities to capitalize on the region’s expanding automotive sector.
