Amidst higher costs and lower demand, South Korea’s top three tyre manufacturers: Hankook Tire, Kumho Tire and Nexen Tire, have reported mixed financial performances in the third quarter. While Hankook and Kumho managed to post strong profits, Nexen struggled amid rising shipping expenses and weaker demand in North America.
Hankook Tire hit a new record for quarterly sales at US$1.77 billion, up 4% from last year. Operating profit also surged to an 18% increase, giving the company one of its best profit margins yet. The boost came from strong demand for premium products: nearly 45% of Hankook’s sales came from high-value, 18-inch-and-larger tyres for passenger cars and light trucks.
Meanwhile, Kumho Tire, the second-largest player, also had a solid quarter, with sales rising 14% to 1.12 trillion won and operating profit jumping 45% to 789 billion won. This gave Kumho a healthy 12% profit margin, sustaining four straight quarters of double-digit profitability. Like Hankook, Kumho is focusing on larger, higher-margin tyres — sales of 18-inch-and-up tyres rose to nearly 42% of its total sales.
On the other hand, Nexen Tire faced a tougher quarter. While its sales grew 2.3% to 708.5 billion won, operating profit dropped 25%, and net income slid into the red with a 700 million loss. Although Nexen also increased its share of high-inch tyre sales, weaker demand in North America and rising shipping costs weighed heavily on its profits.
While Hankook and Kumho produce over half their tyres outside South Korea, with Hankook leading at 67.5% overseas production, Nexen only produces 35% of its manufacturing capacity abroad, making it more vulnerable to shipping cost increases.
Meanwhile, all three companies are planning to expand their overseas production to mitigate these logistical costs, in the US and Europe, in a preemptive move to widen their share in the lucrative electric vehicle (EV) tyre industry. Hankook is investing US$1.6 billion in its factory in the US state of Tennessee by 2026 as well as its facility in Hungary, which serves the European market. Kumho is ramping up production at its plant in Vietnam, to over 35 million tyres.
Nexen, meanwhile, is doubling down on its plant in the Czech Republic, with plans to boost production from 5.5 million tyres this year to 11 million by 2025. It is also investing around 1.73 trillion won to build a tyre manufacturing facility in the US with plans to start its operation by 2029.