OE deals driving strong Nexen growth in China
Over the past couple of years Korea’s Nexen Tire has enjoyed a growth rate of more than 200 per cent in China, and the tyre maker expects this year’s growth to be no different. A reason for this positive appraisal is the numerous original equipment agreements the company has recently finalised in the People's Republic.
Since the start of 2011, the Verna model range produced by Beijing Hyundai Motor Company, the Chinese subsidiary of the Hyundai Motor Company, has been fitted with Nexen tyres. And early in the second half of the year Nexen began supplying tyres to Chinese vehicle manufacturer Anhui Jianghuai Automobile Co. Ltd. (JAC), a company that in 2010 sold some 460,000 vehicles, mostly in the domestic market.
Adding to these two agreements are supply contracts due to get underway next year. As of 2012, Nexen will supply tyres to further Beijing Hyundai models and will also begin original equipment supply to Dongfeng Yueda Kia, a joint venture company operated by Dongfeng Motor Corporation, Kia Motors and the Yueda Group. Thus, next year a further four Chinese market vehicle models will be equipped with Nexen tyres.
In announcing these new deals, Nexen comments that its rapid Chinese market growth can also be attributed to the ongoing development of its portfolio there and the introduction of products that meet the needs of Chinese customers. The Korean manufacturer, perhaps in light of issues some of its compatriots have faced in China, also states that sales figures reflect the attention it pays to quality control. In 2010, Nexen sold 1.1 million tyres in China.
In Nexen’s view, China has developed into an increasingly interesting market for the entire automotive industry. The Korean manufacturer has been active in China since establishing a subsidiary, Qingdao Nexen Yuntae Inc, in 2005. Following a five-year planning period the foundation stone for Nexen’s new factory in Qingdao, Shandong Province was laid in May 2006, and production of passenger car and light commercial vehicle tyres commenced in January 2008. Today 1,100 workers are employed at the 1,635,000 square metre site, which in addition to a factory also houses a research and development centre.
Management at Nexen state they are particularly proud that the Chinese subsidiary was operating in the black within three years of production commencing. In 2010, more than 70 per cent of Nexen’s production at Qingdao was exported to more than 130 countries around the world. That said, Chinese market demand continues to grow and to accommodate this Nexen intends to expand the Qingdao plant in the next few years. “Capacity should increase from current levels of six million units per year to eight million,” commented Jae Soo Lee, senior managing director and general manager of corporations for Nexen in China.
Further plans involve continued investment in China until 2017 in order to give the tyre maker a 20 million unit per annum production capacity there. At this time the Chinese plant, along with the tyre maker’s Korea-based factories (its original factory in Yangsan and its new factory in Changnyeong, Korea, which will start production next year) will enable Nexen to produce 60 million tyres a year.