Hyundai, Hankook Tire may rebuild relations with new test-driving center

Hyundai Motor Group has reached a tentative agreement to build the country’s biggest test-driving center at a new tire testing facility of Hankook Tire & Technology Co. Ltd., a move seen as an effort to restore their relationships damaged over the latter’s recall several years ago.

Hyundai Motor vice chairman Euisun Chung joined the signing ceremony on June 17 to construct a driving experience center at Hankook Tire’s testing facility to be constructed in Taean, about 150 km southwest of Seoul, according to Hankook Tire.

“The announcement builds on the two companies’ shared commitment to meet the needs of the fast-changing automobile and mobility markets, leveraging this partnership as a new growth engine in the medium to long term,” Hankook Tire said in a statement.

“As we co-develop these facilities with Hyundai Motor Group, we seek to strengthen the capabilities and further develop Korea’s driving culture together,” Hankook Tire’s president and COO Soo Il Lee was quoted as saying.

At the new facilities, Hankook will “innovate new products, comply with stringent safety and environmental regulations, and meet customers and investors’ expectations for quality and value,” he added.

The announcement comes after Hyundai recalled about 43,000 units of the Genesis premium sedan designed for the 2015 model year because of tire defects. The tires, manufactured by Hankook, may develop cracks in the tire sidewall and lose air, according to the National Highway Traffic Safety Administration.

The recall cost tens of millions of dollars and dealt a setback in Hyundai’s efforts to enhance its brand image.

Since then, Hyundai Motor Group which includes Kia Motors Corp. has reduced dependence on Hankook Tire. Instead, it imported tires for new models such as the Palisade SUV and Sonata sedan from Goodyear, France’s Michelin, Germany’s Continental and Japan’s Bridgestone to bolster its premium image.

For LPG vehicles which are cheaper than gasoline-powered models, Hyundai turned to two other domestic suppliers including Kumho Tire, excluding Hankook Tire.

Hit by their soured relationships, operating profits at Hankook Tire have been on the decline since 2017. Hyundai Motor Group is its biggest client.

Investors welcomed the announcement of the facilities co-development. Shares in Hankook Tire closed 6% higher at 25,900 won in heavy trade on Wednesday, outperforming the broader KOSPI index that ended flat.

Hyundai Motor edged down 1% at 100,500 won. Year to date, it lost 17%, due to double-digit falls in the January-May car sales of both Hyundai and Kia.

The test-driving center at a 126,000-square-meter site is scheduled for completion in the first half of 2021. It will be as large as 176 soccer fields combined.

With the longest test roads in Asia, the new tire-testing facility will enable rigorous testing of Hankook’s most advanced products, such as EV, run-flat, and super car tires, the company said.

Write to Chang Jae Yoo at yoocool@hankyung.com