Nexen Tire (002350) is moving to build a new overseas plant. With its domestic plants and facilities in China and the Czech Republic effectively running at full capacity, the company aims to expand by establishing a new production base with cost competitiveness.
According to the tire and securities industries on the 25th, Nexen Tire is reviewing an investment in a fifth plant. The plan was shared at a recent briefing for institutional investors.
Nexen Tire is currently identifying candidate countries for the new plant. It is reportedly weighing a wide range of options, including the United States, Southeast Asia, and Latin America. The company pursued a new U.S. plant in 2023 but expanded its scope to developing countries after concluding that high investment and labor costs would make securing cost competitiveness difficult. "Building a new plant in the U.S. would require 3 trillion won, but in countries like Thailand, where global tire makers are concentrated, the cost falls to a third," an industry official said. "Considering labor availability and wages, the company is likely to manufacture in countries with lower production costs and export to the U.S."
Nexen Tire currently operates production bases at its Yangsan and Changnyeong plants in South Gyeongsang Province, as well as in Qingdao, China, and the Czech Republic in Europe. The four plants had a combined annual production capacity of 47.518 million units as of the end of last year.
The push for a new plant comes as utilization rates at existing facilities are already approaching 100%. The recently completed Czech plant posted a first-quarter utilization rate of 98.9%, while the Changnyeong (94.1%) and Yangsan (90.6%) plants also operated above 90%. The Qingdao plant ran at 87.8%, bringing the four-plant average to 92.8%.
Through the new plant, Nexen Tire aims to significantly expand capacity and seize the initiative in a tire industry entering a phase of structural growth. The tire market has long been led by Michelin, Continental, and Pirelli on the strength of their unrivaled technology. But Korean players including Hankook Tire, Kumho Tire, and Nexen Tire have rapidly established themselves by offering products with performance comparable to top-tier brands at less than half the price.
Pricing power has also begun shifting to the latecomers. In late April, Nexen Tire announced a 5% price hike across Europe, Latin America, and the Asia-Pacific region. By securing the ability to lead price increases, the company has built a structure in which rising production volumes translate directly into profits.
The phasing-out of Chinese tires in the European market is another tailwind for Nexen Tire. The European Commission will impose anti-dumping duties on Chinese-made passenger car tires starting June 18 this year. As a result, products that Nexen Tire manufactures in Qingdao and exports to Europe will also face a 29.9% tariff.
But the industry is paying more attention to the blocked inflow of low-priced Chinese products that have distorted the European market. The shift creates a favorable pricing and sales environment for Nexen Tire and other Korean players. Nexen Tire has been exporting 3 million units annually from its Qingdao plant to Europe, of which 2 million can be produced in parallel at its domestic plants — limiting the direct hit from the tariffs.
"Imports of Chinese tires into the European market are already declining, and domestic tire demand will pick up in earnest from the second half," a tire industry official said. "An environment is taking shape in which Korean tire makers can pursue capacity expansion with sales already secured."
Nexen Tire's revenue this year is forecast at 3.3801 trillion won, up about 6% from 3.1896 trillion won last year. Operating profit is also expected to rise 16.9% to 199 billion won, from 170.3 billion won a year earlier.
