U.S. President Donald Trump stated that if he imposes a universal tariff of 10-20% on all imports as promised during last year's presidential election, the fortunes of domestic tire manufacturers are expected to vary. Korean Tire & Technology (Hankook Tire) and Kumho Tire, which are operating factories in the U.S., are expected to be less affected by the tariffs, while NEXEN TIRE, which does not have a factory in the U.S., is anticipated to suffer significant blows.

According to the tire industry on the 7th, the North American market accounts for 27-30% of the total sales of the three domestic tire companies. Kumho Tire recorded sales of 4.0414 trillion won in its tire business last year, of which 30.8% was obtained in North America. Hankook Tire and NEXEN TIRE also have North American market shares of 27.3% and 27.2%, respectively.

Overview of the Korean Tire's factory in Tennessee, USA. /Courtesy of Korean Tire

Hankook Tire has been operating a local factory in Tennessee, U.S., since 2017. This factory currently produces 5.5 million tires annually, and when the ongoing expansion is completed next year, the production capacity will double to 11 million tires. Kumho Tire's factory in Georgia, which started operations in 2016, also expanded its production facilities in 2022 and is currently producing 4.5 million tires annually.

On the other hand, NEXEN TIRE operates only two overseas factories, in Jatec and Qingdao, China. The Jatec factory mainly supplies the European market, which represents the largest share of its sales. Most tires sold in the North American market are manufactured domestically and then exported.

The U.S. has been imposing a 10% tariff on Chinese products since the 4th. If a universal tariff of 10-20% is added, NEXEN TIRE's sales in the North American market are likely to shrink. Some Chinese tire manufacturers competing with NEXEN TIRE in the North American market operate factories in the U.S., and if tariffs are imposed, their price competitiveness will decline. GT Tire, a major Chinese tire manufacturer, has been operating a factory in South Carolina, U.S., since 2017.

Kang Ho-chan (fifth from left), Vice Chairman of NEXEN TIRE, along with the management and key stakeholders of NEXEN TIRE, poses for a commemorative photo after the groundbreaking ceremony of the Zatec factory in the Czech Republic on Oct. 1, 2015. /Courtesy of NEXEN TIRE

NEXEN TIRE faces a growing possibility of missing out on large new orders in the North American market. The domestic tire industry had high expectations for Hyundai Motor Group's Georgia 'Meta Plant America,' which began operations last October. The Meta Plant is capable of producing over 300,000 eco-friendly vehicles annually, so the new order volume for tires supplied to electric vehicles and hybrid vehicles is expected to increase.

In the tire industry, there are concerns that NEXEN TIRE's management did not make bold decisions and thus missed the timing to respond to changes in the U.S. market, such as the universal tariff. NEXEN TIRE announced plans to invest 1.8 trillion won to build a factory in the U.S. in 2023 and searched for several possible sites, but it decided to re-evaluate last year's plans from scratch. It was determined that it would be difficult to pour massive funds into it amid challenging financial conditions.

An industry source commented, “Unlike some premium brands like Michelin and Pirelli, NEXEN TIRE competes in the market for budget-friendly tires, which emphasizes cost-effectiveness,” adding that “if a universal tariff is imposed, there is a high possibility that overall performance will worsen due to decreased sales in the North American market.”