Nexen Tire aims for top ten

Korea’s longest-established tyre maker, Nexen Tire, recently opened its latest factory, a highly automated plant that will help the tyre maker reach its goal of almost tripling output by the end of the decade. The Changnyeong plant entered production in April and this year it will turn out some three million passenger car, 4×4 and light commercial vehicle tyres. This figure will then rise significantly over the next few years, reaching 21 million – 60,000 tyres a day – by 2018. By that date, Nexen says it will have invested a total of 1,200 billion won (£650 million) in the plant.

The new facility in Changnyeong, a three hour drive southeast of Seoul, is Nexen’s third. The company, which celebrates its 70th birthday later this year, also operates a plant at its headquarters site in Yangsan, South Korea, and a relatively new facility in Qingdao, China. The three plants are expected to produce a combined total of around 27 million tyres this year.

“We are putting our hearts and souls into Nexen Tire’s industrial complex in Changnyeong to become a global tyre manufacturer,” stated Nexen Tire CEO Hyund Bong Lee when the factory entered service. But not only hearts and souls have gone into the new plant; housed within the Changnyeong factory’s 495,800 square metre buildings is some of the latest tyre building equipment, supplied by a number of the world’s most respected machinery manufacturers, including Harburg Freudenberger, Comerio Ercole, Krauss Maffei, Karl Eugen Fischer, VMI, Mitsubishi and Korean firm, Hanwha TechM. The plant is located for convenient motorway and port access, and features aimed at improving the workplace and wider environments, such as solar panels (initially generating 2.9MW, with a total of 6.1MW planned) and a ventilation system for removing rubber odours, have also been built into the plant. In short, the facility is designed to be internationally competitive.

By the end of this year, the Changnyeong plant will employ around 780 people, with the workforce growing to more than 2,000 when investment in the plant is complete. And, as Nexen management pointed out to Tyres & Accessories, unlike some of its competitors, the jobs created will be jobs in its home market. Although the decision goes against the trend of locating production in the region where products will be sold, Nexen says it chose to establish the new plant in Korea rather than in a low labour cost country as it is committed to ‘made in Korea’ and because it believes it can best guarantee product quality when manufacturing at home. Korea’s government is also currently providing incentives to companies forsaking oversees production and setting up domestic facilities, however it was not known whether any such considerations influenced Nexen’s ultimate choice of location. At any rate, Nexen anticipates its Korean workforce and high level of automation will enable the company to produce world-class high performance, eco-friendly tyres – precisely the sort of tyre Nexen must produce if it is to fulfill its stated ambition of entering the tyre making ‘top ten’ by 2020.

Becoming a top-ten global tyre maker within eight years requires significant growth in output on Nexen’s part. As mentioned earlier, the tyre maker’s three factories are expected to turn out a combined 27 million tyres this year, all passenger car, 4×4 and light truck sizes. By 2014, it plans to produce 40 million tyres annually and in 2017 a total of 60 million tyres are on the cards. Total planned output two years further down the track is 80 million tyres. Can Nexen almost triple its output in eight years? Byung-Woo Lee, vice-president of Nexen Tire, believes it can. This increase represents, he told Tyres & Accessories, “only ten million more every year.” Lee added that a good proportion of this additional output will be sold in the original equipment sector, where Nexen’s volumes are increasing.

Lofty OE ambitions

At a recent event held at the Changnyeong facility, Joo-Ho Song, senior managing director, global marketing at Nexen, discussed Nexen’s original equipment sector ambitions and shared that the tyre maker sees OE business as one of two crucial avenues it can take to further establish the Nexen brand’s credibility. “Two things are important to growth – OE business and magazine tests,” he said. “Both are important to establishing Nexen’s reputation for quality. We have to get more OE business and perform well in magazine tests to establish further brand credibility.”

Song shared that Nexen plans to grow its global original equipment business by a 23 per cent compound annual growth rate (CAGR) to 2015, a total growth of 128 per cent. At this time OE will account for 8.2 million pieces. Most of this growth is anticipated in global markets; at present, supply to OEM customers in Korea accounts for 92 per cent of the 3.6 million original equipment tyres Nexen supplies. By 2015, the company expects domestic supply to only account for 57 per cent of the total. Should Nexen’s estimates prove accurate, supply to overseas OEM customers, currently only a modest 276,000 units per annum, will balloon to 3.5 million units within the next three years. By 2017, Nexen intends original equipment sales to account for 25 per cent of the 60 million tyres it sells, with Korea and China each accounting for 30 per cent of OE sales and all other overseas markets the remainder. Amongst the original equipment deals now under negotiation are agreements with global manufacturers including Volkswagen, Fiat, Chrysler, Skoda, Mitsubishi, Renault and Alfa Romeo. And just as Japanese manufacturers stuck to their home country suppliers when opening overseas plants in previous decades, today Chinese-made Hyundais or US-built Kias leave the factory with Nexen tyres, further boosting the tyre maker’s international OE portfolio.

Ranked second in Korea

Planned domestic growth in the original equipment segment is “only” nine per cent CAGR to 2015, a rise from 3.3 million to 4.7 million units. This reflects the fact that Nexen, along with its two Korean competitors, already holds a massive chunk of the Korean tyre market. According to Korea Tire Manufacturers Association estimates for 2012 passenger car and light truck tyre sales, Hankook is the Korean market leader, with 38 per cent of sales. Nexen – sometimes thought of as the “third” Korean tyre maker, is expected to be in second place, with sales equaling 28 per cent of the market. Kumho is tipped to be close behind, with 27 per cent. When sharing these results, Joo-Ho Song commented that Kumho is often perceived as larger “as the company is active in many areas. Nexen only produces tyres.” The remaining eight per cent of the market is divided up between the global tyre majors and other manufacturers; most imported tyres entering Korea arrive on the new cars they are fitted to as original equipment.

Top-tier a development goal

As touched upon earlier, Nexen only produces consumer tyres and says it has no plans to enter the commercial vehicle, off-road or specialty tyre segments.  According to Gyeong-Woo Chun, Nexen’s managing director of OE development, the company’s aim is to develop leading top-tier passenger car tyres; achieving this is the job of Nexen’s four research and development centres. The most important of these is the head R&D centre attached to the Yangsan plant, which amongst other things conducts core technology research and work on high value added tyres. The Yangsan centre is supported by technical centres in Germany, the US and China, which focus upon their respective regions.

For 2012, Nexen’s research and development team intends to introduce five new passenger car patterns, six light commercial and 4×4 patterns and two original equipment patterns. Amongst the products under development is the company’s first run-flat tyre; Joo-Ho Song told Tyres & Accessories that Nexen will launch a comfortable, well-priced replacement market run-flat at the start of next year and export this product to Europe. Another priority in recent times has been the development and implementation of technology for the European tyre label. The aim for this year was to bring a ‘BB’ rated tyre to market; Nexen announced in June that it has achieved this with its N’blue Eco, which it says has attained this high rating plus noise levels of 71dB. Next year Nexen is gunning for an ‘AB’ rating, and after that the Korean manufacturer intends to address trade-offs. A ‘triple A’ rating is hoped to be reached by 2015.

The new factory should play a key role in Nexen realising this and other mid and long-term goals. Tyres produced in Changnyeong are intended to be ‘world class’, both in the high performance and standard segments, as well as environmentally friendly and a credit to the words “made in Korea”. Nexen has arguably set itself ambitious goals for the coming decade, but given the equipment present in the new facility, the level of automation employed and the environmental measures implemented, the Changnyeong plant has what it takes to be internationally competitive.

Comments
Comments closed

We see you are visiting us from China.

If you would like the latest news from the Chinese tyre industry in Chinese, visit our partner site TyrepressChina.com. Or click below to continue on Tyrepress.