Foreign investors pump millions into tires

Foreign investors pump millions into tires

Foreign tire manufacturers have flocked to Vietnam with plans to turn the country into their production base as well as a new consumption market.

However, this does not mean that the market will remain small forever. Quite the opposite: foreign investors are seeing great opportunities to make profits in the Vietnamese market.

Analysts say domestic manufacturers currently hold 40 percent of market share, while foreigners hold 60 percent. That larger share includes the most lucrative market segment, passenger car tires, which have selling prices much higher than other products because of the high technologies required.

According to Huynh Tan Vuong, Marketing Director of Kumho Tire Vietnam, the Vietnamese market has great potentials, with an annual growth rate of 20-25 percent. The promising market has attracted the world’s leading tire manufacturers: Bridgestone, Michelin, Kumho, Yokohama and Goodyear.

The South Korean Kumho recently announced its plan to pump an additional $100 million into Vietnam to expand its tire factory in Binh Duong Province, which had initial funding of $200 million. Once the expanded investment, slated for 2015, is completed, the factory will churn out 5.6 million products a year, nearly double its current output of 3 million.

The Japanese Bridgestone has received an investment license to increase the investment capital of its factory in the northern city of Hai Phong from $574 million to $1.2 billion.

The factory has an expected capacity of 9 million products per annum, or 9 times bigger than Vietnam’s Casumina’s Radial, to be reached by 2017. Meanwhile, the first commercial batches of goods are expected to hit the market by June.

The most outstanding feature of Kumho and Bridgestone-made tires is that they are radial tires made with modern technologies. Domestic manufacturers make mostly bias tires, using Chinese technologies.

The two manufacturers not only have been making money with passenger car tires, but also trying to make tires for pick-ups and vans, a market segment long considered the “playing field” of domestic enterprises.

A source said that the products now amount to 23 percent of Kumho’s total products.

As the domestic market remains small, all the tire manufacturers have been boosting export to earn more money.

Vuong of Kumho Tire Vietnam said more than 95 percent of the company’s products are exported to the Northern American markets, the Middle East, Asia and Australia. The same percentage for export is expected by the managers of Bridgestone’s factory in Hai Phong City.

Vietnam, with its cheap labor force, abundant rubber supply and zero export tariff (versus 8 percent in China) provides great advantages to the tire industry.

The Southern Rubber Industry Corporation (CSM) in the south, the Da Nang Rubber JSC (DRC) in the central region, and Sao Vang Rubber JSC (SRC) in the north are the three biggest Vietnamese manufacturers in the field.

vietnamnet