Hankook Tire, Kumho, Nexen to build plants in US, Europe amid EV transition

A tire manufacturing facility of Hankook Tire in the U.S. state of Tennessee / Courtesy of Hankook Tire

Korea's three major tire makers, Hankook Tire, Kumho Tire and Nexen Tire, are accelerating the expansion of their manufacturing capacity in the United States and Europe, in a preemptive move to widen their share in the lucrative electric vehicle (EV) tire industry, according to data and industry officials, Tuesday.

The strategy is aimed at boosting their sales further by winning more orders from global automakers there, after they generated robust earnings in the first quarter of this year.

They chalk up around 80 percent of their annual sales overseas, to two particular regions.

Hankook Tire, the nation's top tire manufacturer, is set to invest $1.65 billion (2.25 trillion won) in its factory in the U.S. state of Tennessee by 2026. The company will also allocate a budget of around 820 billion won to expand the capacity of its plant in Hungary.

The company identifies EV tires as its next cash cow, as EVs are expected to account for over 70 percent in terms of auto sales portion for global carmakers sometime around 2030. Hankook Tire runs its own EV-specific tire brand called iON.

EV tires generate high returns to tire firms, along with big tires larger than 18 inches.

Kumho Tire is also scheduled to complete the selection of the site for its new manufacturing facility in Europe by the end of this year. Its candidates are Romania, Serbia, Portugal and Turkey.

Nexen Tire's factory in Czech Republic / Courtesy of Nexen Tire

The company is the only tire firm of the three that does not operate any manufacturing facilities in Europe. However, as Europe's strategic importance increases in the global auto industry, the company decided to try to secure more clients there.

Nexen Tire also shared its plan to invest around 1.73 trillion won to build a tire manufacturing facility in the U.S. with a plan to start its operation by 2029.

The three tire powerhouses posted triple-digit growth in their operating profit in the first quarter this year, powered by increased sales for value-added premium and big tires.

Officials from the industry said local tire firms will ramp up their investment to increase their production capacity and focus more and more on the EV industry, even at a time when the global EV market has entered its chasm phase.

"Tire firms will place their strategic management focus on widening their presence in the global EV industry," an official from a tire firm said. "EV tires generate better returns than typical ones for vehicles powered by internal combustion engines."

The official added, "As the industry has yet to be saturated, most tire firms will make efforts to preemptively expand their presence by attracting more orders and building better relationships with global carmakers."