South Korea`s three major tire makers are focusing resources on developing and distributing more lucrative Ultra High Performance Tires (UHPTs) whose demand is set to grow rapidly.

According to disclosure data filed by Hankook Tire Co. Ltd., Kumho Tire Co. Inc. and Nexen Tire Corp., their combined operating profit for the third quarter ended September surged 29 percent to 372.0 billion won ($313.7 million) from a year earlier, whereas total sales fell 2.6 percent on year to 2.8 trillion won over the same period.

The surge in operating income was driven by an improved product mix from growing sales of UHPTs. UHPT sales in the quarter rose to 43.1 percent in Nexen Tire and 34.2 percent in Hankook Tire, up 2 to 3 percentage points, each, from a year ago. Kumho Tire’s sales of tires larger than 17 inches represented a record 37.2 percent of its total sales.

Their strong commitment to supplying UHPTs is directly associated with a change in the landscape of finished car markets.

According to Hyundai Motor Group’s Global Management Institute, the worldwide new car market is expected to grow a mere 2.4 percent this year, which will cause a slow growth in the tire market for new vehicles.

In contrast, demands for cars equipped with UHPTs are rising. According to global consultancy Smithers Rapra, the UHPT market will be valued at 44 trillion won in 2020.

UHPTs increase a car’s braking performance with excellent anti-skid ability. Maximum driving limitation speed also increases with tire deformation decreases in high speed. The UHPT costs 150,000 won to 1 million won a piece, higher than the ordinary tire by 15 percent or even three times.

Tire makers are seeking to improve their UHPTs while adding top-notch research and development facilities.

Hankook Tire installed cutting-edge equipment in its new research center established in October with 266.4 billion won investment. Hankook Tire’s UHPT sales grew by about 40 billion won in China, Europe and North America in the third quarter from a year ago.

Nexen Tire is focusing its cross-border resources on marketing UHPTs. Sales of its UHPTs represent some 50 percent in major markets: China (53 percent) and Europe (47 percent). Nexen Tire is behind Kumho Tire in the quarterly revenue with 470.2 billion won versus 710.1 billion won, but its operating profit of 65.4 billion won is seven times that of Kumho (9.5 billion won).

Kumho Tire aims to secure a stronghold for expanding UHPT supplies through its new plant in Georgia, USA established in May.

By Park Chang-young

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]