Despite the rise in cheap imported tyres and frequent labour strikes in the industry, Sumitomo Rubber Industries (SRI) is forging ahead with a R1.1 billion investment into its factories in Ladysmith, KwaZulu-Natal to position itself as the leading player in the continent’s tyre market.
The Japan-based group bought the South African operations of India’s Apollo Tyres, as well as the Dunlop brand rights for R600 million last year.
The transaction excluded the Durban manufacturing hub of Apollo Tyres, which has since applied for business rescue.
SRI was the fifth-largest tyre manufacturer in the world in 2012, and has about 11 factories around the world. The group’s biggest factory is in Thailand and produces about 70 000 tyres a day with plans to increase this number to 100 000 by the end of next year.
The new company under SRI is now known as Sumitomo Rubber South Africa (SRSA). Its new head offices are in Lion Match Office Park in uMngeni, Durban.
Ikuji Ikeda, the president and chief executive of SRI, said Africa was a strategic growth region for the group.
“We have assumed that the total market in South Africa is about 3 percent of the total global tyre market. It might be a big number, but everyone knows that the African market will continue to grow as the result of developing economies and global investments,” he said.
SRI’s R1.1bn investment at its Ladysmith factory is to expand production capacity, enhancing quality, as well as presentation in the locally produced tyres. The Ladysmith factory manufactures passenger car tyres, as well as light truck tyres.
In addition, South Africa has a strong original equipment motor industry with many manufacturers.
“SRI has built relationships globally with many of these manufacturers and this is one of the main reasons that we decided to buy Apollo Tyres South Africa and to invest for the future,” Ikeda said.
He also raised concerns about labour strikes in South Africa and said he was comforted. “We have started to develop new labour relations with factory employees.”
SRSA’s chief executive Riaz Haffejee said SRI’s offices in South Africa would help the global company to reach new markets in Africa. “We know that we want to expand the Dunlop brand into Africa and this was the best place to start doing this,” he said.
The Ladysmith plant currently produces about 9 600 tyres a day and has capacity for 10 500 tyres a day.
The investment would be used to expand the Ladysmith factory, as well as to introduce new technological systems.
Haffejee said new job creation would only happen towards the end of 2017, “after the factory expansion and when the new systems are in place”.
SRI investment has come amid high tyre import incidents, which are threatening the future of the industry.
But Haffejee said high imports did not mean that investments into the industry should not happen. Imports of passenger car tyres had grown by 156 percent since 2008, light commercial vehicle tyres by 154 percent and truck tyres by 191 percent in the same period.
Haffejee said cheap imported tyres were a cause for concern, adding that his firm had seen a shift in market share of imported tyres. SRSA also imports some of its tyres as the Ladysmith factory cannot manufacture all sizes.