The European Union's decision to impose tariffs of up to 52% on Chinese-made tires has disrupted Korean tire makers' strategies for the European market. The industry is expected to respond by expanding local production in Europe.
According to the tire industry on Wednesday, the European Commission recently notified manufacturers of the provisional tariff rates to be applied to Chinese-made tires. The final rates are scheduled to be finalized around the middle of next month.
The investigation began after European tire makers formed the Coalition Against Unfair Tire Imports (CAUTI) to counter the erosion of their domestic market by low-priced Chinese products, filing a petition with the European Commission in April last year. The Commission concluded that low-priced Chinese tires were eroding the market and threatening local industry, and determined tariff rates based on factors including cooperation with the investigation.
Under the decision, Kumho Tire (073240.KS) and Nexen Tire (002350.KS) were assigned a tariff of 29.9%. The two companies plan to file objections before the final rates are confirmed in mid-next month and to request additional investigation from the European Commission.
Since the European market accounted for around 40% of the combined revenue of Korea's three major tire makers last year, the impact will be unavoidable once the tariff rates are finalized. The three companies had been targeting the global market by offering quality comparable to premium tires such as Michelin at lower prices as their competitive edge.
The move is expected to accelerate the restructuring of Korean tire makers' supply chains. Kumho Tire is expected to increase production at bases in Korea and Vietnam, along with building its Poland plant targeted for completion in 2028. Nexen Tire plans to respond by raising the utilization rate of its Czech plant to 100%.
In contrast, Hankook Tire & Technology (161390.KS), which has built a local production system based on its Hungary plant, received a relatively low tariff rate of 3.4%. The lower rate is attributed to the fact that Chinese-made tires account for 30% of Hankook Tire's European sales, a lower share than its competitors.
