Record-breaking performance of Tire companies thanks to EVs and SUVs

Last year, the tire industry witnessed remarkable performance, reaching record-breaking levels. There has been a surge in the sales of high-value-added tires with higher unit prices and substantial profitability gains attributed to decreased maritime logistics costs and raw material prices.

According to reports from the tire industry on Sunday, Hankook Tire & Technology (Hankook Tire) set new all-time records in both sales (8.9396 trillion won) and operating profit (1.3279 trillion won) last year. Similarly, Kumho Tire reported its highest-ever annual operating profit of 388.3 billion won, while Nexen Tire achieved record-high sales with 2.7017 trillion won.

The combined operating profit of the three companies amounted to 1.9029 trillion won, marking a substantial increase of approximately 2.8 times compared to the previous year's figure of 674.6 billion won. This marks the first instance in seven years, since 2016, that the combined operating profit of the three tire companies has surpassed 1 trillion won. They seem to have effectively rebounded from the impact of the novel coronavirus infection (COVID-19).

The driving force behind the outstanding performance of the three companies was the demand for high-value-added tires. Exclusive tires designed for sports utility vehicles (SUVs) or electric vehicles (EVs) command higher unit prices than other products. Given the increased weight of EVs due to their batteries and SUVs due to their size, these tires are specially engineered to endure these conditions.

Furthermore, the recent trend in the automobile industry favoring the installation of larger tires, specifically those exceeding 18 inches, has also significantly influenced the performance of these companies. For example, Kumho Tire reported that the proportion of its large tire products reached 38% last year, with plans to increase this figure to 42% this year.

The three tire makers aim to sustain their record-breaking performance this year by capitalizing on high-value-added tires. Kumho Tire and Nexen Tire have set ambitious sales targets for this year, with Kumho Tire aiming for 4.56 trillion won and Nexen Tire targeting 2.9 trillion won—both figures representing all-time highs for the respective companies. However, Hankook Tire has not yet disclosed its sales target for the year.


한재희기자 hee@donga.com