Korean tire makers step up push into bigger, high-margin tires

South Korean tire makers are betting big on premium tires fitted for sports utility vehicles, full-size sedans and electric vehicles, after bigger and high-end products drove their earnings to record highs in 2023.

Earnings at the country’s top three tire makers -- Hankook Tire & Technology Co., Kumho Tire Co. and Nexen Tire Corp. -- are expected to maintain upward momentum this year as they are gearing up to push their high-value-added products.

Hankook Tire aims to raise the proportion of 18-inch tires, or bigger, to more than 49% of passenger car and light truck (PCLT) tire sales this year, five percentage points higher than last year’s, according to industry officials on Friday.

The country’s largest tire maker is also working to boost EV tire sales to 25% of its revenue in 2024, up 10 percentage points compared to last year.

Tires of 18 inches or bigger are fitted for premium vehicles. They use reinforced materials and feature a different internal structure than smaller tires to enhance driving safety and reduce noise while driving.

“The margin on a small tire is around 5%, but it is closer to 20% for a bigger tire,” said a tire company official.

A 20-inch tire under Hankook’s premium brand Ventus sells for 312,100 won ($226), while its 17-inch tire is priced at 183,900 won

In 2023, its earnings skyrocketed 88% on-year to 1.3 trillion won, its largest-ever results, thanks to brisk sales of 18-inch or bigger tires.

Kumho Tire is aiming to bolster the big-size, high-end tire sales to 42% of revenue this year, up 3.9 percentage points compared to 2023.

EV tires are expected to make up 16% of its total sales, 7 percentage points higher than last year. 

Nexen Tire sees 18-inch or bigger tires reaching 34.5% of sales in 2024, with EV tires accounting for 10%.

EV TIRES

EV tires are more than 30% more expensive than those for internal combustion engine vehicles.

They are made from next-generation reinforcing materials such as high-concentration silica and high-performance polymer to improve grip and wear resistance.

Korean tire manufacturers pin their hopes on replacement demand for EV tires given slowing EV sales growth after a rapid increase in the past few years.

Tire lifespan varies depending on the country's road conditions and the driver's driving habits, but is usually around two to four years.

Global EV sales jumped sevenfold to 14.06 million units in 2023, compared to 2.22 million units in 2020, according to SNE Research.

In 2024, EV sales are forecast to rise 16.6% on-year to 16.41 million units.

Hankook Tire has recently unveiled its EV-dedicated tire brand iON tires. Kumho Tire introduced the EnnoV brand for EVs only.

The top three tiremakers in Korea likely posted more than 530 billion won in combined operating profit in the first three months of this year, more than double the previous year’s 261.6 billion won, according to analysts.

Write to Jin-Won Kim at Jin1@hankyung.com

Yeonhee Kim edited this article.