Executives at Hankook Tire said Thursday that the South Korea's leading tire maker will grow China- intensive down the road to jump up to the global top five in the tire industry.
"No one can become a world-class company without success in China," Suh Seung Hwa, vice chairman and chief executive at Hankook Tire, told reporters. "The Chinese market has a great significance, especially to us, given the size of the market."
About 220 million tires were sold per year in China, accounting for one seventh of the total global sales. Hankook maintained its dominance in the Chinese market after topping the market share of 20 percent for the first time in 2010.
Since 1994 when it set up its Beijing branch, Hankook has aggressively made inroads into the Chinese market by establishing factories in Jiangsu and Jiaxing in 1999. The two plants had a combined annual capacity of 30 million units per year.
Chongqing plant, the third in China, started operating at its full capacity in January 2013 with the annual capacity of 800,000 units a year. The plant will produce 11.5 million tires upon its completion in 2015, helping Hankook make more than 100 million tires per year globally. "After our entry into the Chinese market, we sought to reform ourselves into a China-indigenous company rather than a Korean company by investing into R&D and making products most optimized for Chinese consumers,"said Woo Byung Il, vice president at Hankook's global OE division.
Hankook, which had a 72 year-long history and engaged only in the tire business, consistently invested in R&D to improve its product quality and safety. The company had five global R&D centers in China, Germany, Japan, the U.S. and South Korea, repectively.
The China Technical Center, established in Jiaxing in 1998 and upgraded in 2006, had more than 100 researchers and over 70 types of state-of-the-art testing equipment to manufacture tires tailored to the unique climate and driving conditions of China. "China is the most important market for us. Total tire sales in China will surpass those in Korea in the near future,"said Pae Ho Youl, senior vice president at Hankook's marketing strategy planning division. The firm depended on South Korea for 19 percent of its total sales, while China took up 18 percent. The figures for North America and Europe were 20 percent and 25 percent each.
Among the global top seven, Hankook was the only tire company that saw both sales and operating profit rise in 2012 amid the sluggish demand. The company's earnings have grown around 15 percent per year for five years through 2012.
Sales rose 8.3 percent from a year earlier to a record 7.03 trillion won (6.24 billion U.S. dollars) in 2012, exceeding the 7- trillion-won mark for the first time in the company's history. Operating profit surged 57.9 percent to 912.9 billion dollars.
With the help of consistent R&D investment, sales of Hankook's ultra-high performance (UHP) tires advanced 30.2 percent on-year in 2012. The UHP tire sales in emerging markets surged 86.5 percent last year.
Hankook Tire has been supplying high performance tires to the world's leading luxury automakers, including BMW, Audi, Chrysler, General Motors, Ford, Volkswagen and Toyota. It has been also expanding its presence in a wide range of motorsports, enhancing its tire brand worldwide.
Touching on reasons for its fast growth, vice chairman Suh cited three factors, including focus on safety, foray into overseas markets and dedication only to the tire business. "The tire industry is directly associated with people's safety. We have never released faulty tires if we recognize the faults,"said Suh. "We get to have diversified markets thanks to our active foray into overseas markets since 1960s. And, we have reinvested our profits only into the tire business."
