Hankook Now ‘Number 6 in Europe’

Hankook are now the sixth largest tyre manufacturer in Europe, according to company figures. Speaking during a tour of the South Korean-based tyre manufacturer’s Racalmas, Hungary tyre production plant in November, European PR manager, Felix Kinzer, announced that the company now calculates it is the seventh largest tyre maker in the world in terms of units sales; and not far from sixth. Tyres & Accessories’ own data, which calculates the rankings based on the value of sales using the euro as the control currency, puts the company in eighth. Algebraical differences aside, the point is that Hankook is gaining ground on its competitors, something that is even clearer when you look at Hankook’s take on the current European leaderboard. The company’s calculation puts Hankook in sixth place in the European passenger car tyre market with a 7 per cent market share, snapping at the heels of fifth-placed Pirelli with 8 per cent. Things are even better in the truck and bus tyre business, where the company’s market share has reportedly grown to nine per cent, putting the company in fifth place after Bridgestone (13 per cent), this time ahead of Pirelli (5 per cent). When you consider the rapid growth rates Hankook’ sales are currently experiencing, the company’s arguably ambitious calculations deserve further attention.

Future OE pull-through is likely to support continued sales in the UK, through two routes – well known European brands such as the Audi A3 and A6 are fitments Hankook recently won; and an increasing share of Korean carmakers such as Hyundai and Kia, which thanks to the scrappage scheme are becoming relatively popular in the UK. As far as Hankook’s Korean OE position is concerned, the company is said to have benefited from recent production troubles at its main competitor, leaving it in a stronger position than before. In addition there is the company’s recently announced fitment on the 2010 Vauxhall Astra, under which Hankook tyres will be fitted to UK-bound vehicles finished at Ellesmere Port, provided there are no further unpleasant surprises in the ongoing GM saga.

Performance in the UK truck and bus tyre business is no different, in fact it is better still. When the 2009 domestic truck tyre market was estimated to be down 20 per cent, Hankook was experiencing sales growth of 20 per cent. Such rapid growth in a shrunken market can only mean that the company’s market share has grown exponentially, resulting in Hankook finding itself in a surprisingly influential position – the company must be knocking on the door of third place in the market. The introduction of the company’s e-Cube energy, economy and environment-focused product in October gives the company the opportunity to up its game still further and sell to still bigger, more energy conscious fleets. However, as these products are currently only being produced in South Korea, and short delivery time is key to establishing a bigger foothold in the UK and European markets, it begs the question – will Hankook add truck tyre production on the empty land adjacent to its Hungary plant?

Manufacturer drops plans for run-flat line at Hungary plant

Another area of rapid expansion is at Hankook’s European manufacturing centre in Racalmas, Hungary where the previously reported passenger car tyre capacity expansion plans are now well underway. The current second phase of construction at the company’s Racalmas site, which started production in 2007, will see the company double capacity from 5 to 10 million passenger car tyres annually over the next 18 months at a cost of around 230 million euros. During a recent tour of the facility, Tyres & Accessories spoke with executive vice-president and COO of Hankook Tire, Jin-Wook Choi and found out more about what the company plans to do next.

Following the completion of the phase two expansion in around 18 months’ time, Jin-Wook Choi confirmed that the company is already planning a third phase. Hankook’s huge plot at its ultra-modern Racalmas site certainly has room for further expansion, with land roughly the size of the company’s current phase one and two production currently lying vacant. What the company will do with this space in the third phase of expansion is less clear. Bearing in mind the strong demand for its products Hankook is currently reporting, the most likely options at this stage appear to be for the company to add further passenger tyre or truck and bus tyre production capacity. However, there was also talk of building a test track adjacent to the production plant.

However, in a move that demonstrates the company’s focus on meeting largescale demand, Hankook has cancelled plans to include run-flat production in the current phase of expansion at the company’s Racalmas, Hungary tyre manufacturing plant. Despite announcing that the company would include run-flat tyre production in this round of expansion as recently as 9 September, Jin-Wook Choi told Tyres & Accessories that the company is now prioritising standard tyre production due to demand continuing to outstrip supply in Europe, particularly in terms of UHP sizes. Hankook Tire Europe managers conceded that the decision will result in cost savings and that this was a consideration in the discussions leading up to the decision, however they also pointed out that the company is on course to invest as much as 10 per cent more than the 500 million euros initially earmarked for the total expansion project.

In addition, new European subsidiaries and branch offices are said to be “coming soon.” The first step will seek Hankook upgrade its current Russian branch office into a fully-fledged subsidiary. As well as making this office a more permanent fixture, it has certain bureaucratic benefits such as the ability to directly import products in the Russian market.

Analysts: Hankook shares ‘top pick’ of Korean tyremakers

Financial analysts are recommending buying shares in Korean tyremakers (particularly Nexen and Hankook, which Deutsche Bank named as their “top pick” of the three companies), following their initiation of stock coverage at the end of November. Their view is that internal structural and strategic fundamentals and external conditions are now favouring Korean tyre makers: “The top three global tyre makers continue to lose market share, having lost 10 percentage points in the past 10 years. On the other hand, we expect the global market share of Korea’s three tyre makers to rise to 7.2 per cent by 2010 from 5.5 per cent in 2008 (by revenue),” Deutsche Bank wrote in an investors report dated 21 November.

The analysts see them as long-term global players “thanks to their early entry into the fast-growing Chinese tyre market.” According to Deutsche Bank, Hankook and Kumho have pole position with 15 per cent and 16 per cent of the total passenger car replacement tyre market, respectively (Hankook representatives say it is actually nearer a quarter of the market at 26 per cent). Furthermore, according to the analysts, “nearly 50 per cent of production from low-cost Chinese plants is exported, enabling them to control costs and capitalise on their improving brand name in export markets.”

Deutsche Bank’s analysis singled out Hankook as having market leadership in China and being “within reach of tier two.” While Hankook representatives would say the company is already in tier two and now aiming for premium status, the fact that the company’s progression is becoming so widely accepted (and publicised) must come as welcome news. It is also evidence that, whether you agree with Hankook’s assessment of it being in sixth place or not, the company is one to watch in 2010.

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