Taiwanese Tire Makers Profit from Fast Growing Auto Market in Southeast Asian and South Asian Countries

Benefiting from brisk auto sales in Southeast and South Asian countries like India and Indonesia, Taiwan's major tire makers, including Cheng Shin Rubber Industrial Co., and Kenda Rubber Industrial Co., are likely to score robust business performance in the years to come.

Cheng Shin, which chose India and Indonesia as the springboards to the global market, has been developing the tire market in both the said countries, partly because of the continuously growing market demands there, and partly because of the solicitation by Honda, its business partner and now one of the most popular motorcycle brands in India.

Thanks to a big order from Honda, a Japanese public multinational conglomerate corporation primarily known as a manufacturer of automobiles, Cheng Shin's motorcycle tire production plant in India, which just became operational in June, 2017 with maximum annual output of 6 million units, has run at 40-50 percent capacity for the moment. With the plant being expected to achieve full capacity during the first half of 2018, Cheng Shin's overall output of motorcycle tires worldwide will have increased by around 10 percent by that time.

At the same time, Cheng Shin, in light of the rapid growth of China's electric scooter market, has been expanding its output of scooter and bike tires in the country, including the second-phase capacity expansion plan for its plant in Zhangzhou, southeastern China, which will boost daily production capacity of the plant from 130,000 units to 200,000 units once completed in the fourth quarter of 2018 as scheduled.

Robert Lo, chairman of Cheng Shin, noted that as ever more global carmakers have localized production in emerging countries, tire manufacturers, as part of their supply chains, have to catch up with those customers and step up setting up and ramping up production overseas.

On another front, Kenda focuses its overseas production on Vietnam and Indonesia with an attempt to tap low manufacturing cost and low duties levied on exports there. The company's Plant 2 in Vietnam, which is dedicated to the R&D of tires for sedans and sport utility vehicles (SUVs), has just kicked off trial production recently.

Kenda reported that products from the plant will be mostly delivered to the American market in the future, given that sedan and SUV tires imported to the U.S. from Vietnam are subject to duty rates of only 4-7 percent, compared to as high as 30-40 percent imposed on those from China. In other words, the Vietnam plant that is eligible for much more preferential tariffs when exporting to the U.S. will enable Kenda to better compete in the market against rivals from other countries.