[Asia Economy Reporter Ki-min Lee] Domestic tire companies are facing three major challenges simultaneously. They are exposed to rising raw material prices, the aftereffects of production cuts due to semiconductor supply shortages at automakers, and the U.S. government's anticipated anti-dumping duties on Korean tires.
According to the industry on the 11th, domestic tire companies are seeking ways to overcome the upcoming U.S. Department of Commerce's anti-dumping duties on Korean tires scheduled for May.
Previously, the U.S. Department of Commerce decided in its preliminary anti-dumping ruling to impose additional tariffs of 38.07% on Hankook Tire, 27.81% on Kumho Tire, and 14.24% on Nexen Tire, with final confirmation set for May.
Last year, the proportion of transactions with subsidiaries in the U.S. reached 39.7% for Hankook Tire, 28.3% for Nexen Tire, and 15.1% for Kumho Tire, making it a key market and putting urgent pressure on them. Therefore, domestic companies plan to respond by expanding overseas tire factories. Hankook Tire is pushing for a second-phase expansion of its Clarksville plant in Tennessee by 2024, and Kumho Tire has decided to expand its plant in Vietnam.
The rise in raw material prices last year is also a burden. Most natural rubber, one of the tire raw materials, is produced in ASEAN countries. Due to natural disasters last year, production decreased by about 10%. Synthetic rubber also faced production disruptions as factories shut down due to COVID-19. As a result, tire companies have raised prices by up to 10% this year.
The tire industry views the anti-dumping duties and raw material price increases as well as the semiconductor shortage crisis as threats to sales. Global automakers are reducing production or halting factory lines for some models due to semiconductor shortages. GM stopped operations at some plants in the U.S. and Canada this month following February. Ford is also halting its U.S. plants until this week due to semiconductor supply issues. Toyota, Honda, and others have also started production cuts.
The situation is similar for domestic automakers. Hyundai Motor Company halted operations at its Asan plant producing Grandeur and Sonata following the suspension at Ulsan Plant 1, which produces Ioniq 5 and Kona. Kia canceled special shift plans at Gwangju Plant 1 and Hwaseong Plant. Korea GM has been reducing production at Pyeongtaek Plant 2 since February, and SsangYong Motor will stop operations at the Pyeongtaek plant from the 8th to the 16th. An industry insider said, "Domestic companies are considering ways to respond to sales declines caused by U.S. anti-dumping duties and rising raw material prices." Regarding the semiconductor shortage, the insider added, "If automakers' production cuts prolong, the impact will also be felt by tire companies."
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