A growing number of major international tire makers are sending orders for contract production to partners in Taiwan, further consolidating the island's foothold in the international tire market and intensifying ties between domestic and foreign tire companies.

Hwa Fong Rubber Ind. Co., for example, recently reported winning a big order for bicycle tires from the European tiremaker Michelin. Kenda Rubber Ind. Co. has reported that its big American customer, Cooper Tire & Rubber Co., will boost its orders next year. Another local firm, Innova, recently received a Japanese order for 1,000 bicycle tires per day.

Industry sources say that the island's tiremakers are striving aggressively to attract more orders from big international brands so as to boost their capacity utilization at plants in Taiwan and mainland China.

Hwa Fong chairman Steven Chang says that he expects shipments of bicycle tires to Michelin under original equipment manufacturer (OEM) orders to total about 1.5 million units this year, double the 2002 figure. The chairman expects the volume to further increase next year, to more than two million tires.



In the area of motorcycle tires, Chang reports that Sumitomo Rubber Industries Ltd., a major Hwa Fong shareholder, has also upped its orders to the company. Hwa Fong is now supplying about 700,000 motorcycle tires from its Taiwan plant and about two million from its Thailand plant to Sumitomo every year. The chairman notes that his company is working hard to win more orders from the Japanese buyer for high-added-value tires, which will be produced at the Taiwan plant.

Hua Fong has completed a second-stage expansion project at its plant in Changshu, Jiangsu Province, and has invested about US$12 million to build a new plant in Suzhou, also in Jiangsu.


Outstripping Taiwan


The Suzhou facility is scheduled to begin mass production in late 2004 and, in its first year of operation, to bring in revenues of around NT$450 million (US$13 million at NT$34:US$1). The company expects to garner total revenues of about NT$1.95 billion (US$57 million) from its mainland operations in 2003 and to do even better in 2004, even outstripping the NT$2.2 billion (US$65 million) taken in by the parent company in Taiwan in 2003.

The mainland subsidiary is the most profitable of all of Hwa Fong's overseas operations, with an expected profit of NT$150 million (US$4.4 million) this year.

The company's international division-of-labor scheme calls for the production of only high-added-value tires in Taiwan, with the manufacturing of bicycle and motorcycle tires relegated to the mainland Chinese and Thai factories. The firm hopes to become a major player in the international big-tire market, and plans to expand its production of light-truck radial tires gradually and prepare for entry into the production of radial tires for passenger vehicles.

The company is also boosting its cooperation with major foreign customers in the large-tire business as well as in the development of the huge mainland Chinese market. One means of enhancing cooperation is through cross-shareholding, which Hwa Fong has already achieved with Michelin and Sumitomo.

Kenda has already transformed itself into a maker of large tires, and is working aggressively to expand that business even as it increases its production and diversifies its product line, according to its chairman, Yang Ying-ming. He is currently restructuring his motorcycle, bicycle, and automobile tire-production lines, and plans to build new plants for each of the three product categories in the future.

Thanks to the production increase, Yang expects his company to take in revenues of over NT$10 billion (US$294 million) this year, making it one of the top 20 tire manufacturers in the world. He expects his revenues to exceed NT$15 billion (US$441) in 2007.

Yang says that mainland China is, without doubt, the most promising tire market in the world, partly because auto manufacturing has been pinpointed for priority development by the government there. The mainland is expected to turn out a total of about 4.1 million autos in 2003, most likely boosting it ahead of France to become the world's fourth-largest auto-producing country.


Growing Mainland Demand


Yang adds that the mainland turned out 67.15 million bicycles in 2002, of which 45.57 million were exported. With more and more international bicycle brands moving production to the mainland, Yang says, the annual demand for tires there will reach about 400 million units in 2003 and continue growing in the years ahead.

The chairman goes on to say that the mainland became the world's top maker of powered two-wheelers several years ago, and that annual production reached around 11.5 million units in 2002. With about 52 million powered two-wheelers on the mainland's streets and highways, there is a huge demand for replacement tires there.

Yang reports that his company will expand its capacity for the production of two-wheeler tires in the mainland even as it works to develop the production of larger radial tires. The firm's plant in Shenzhen, Guangdong Province can turn out about 10,000 motorcycle tires, 70,000 bicycle tires, and more than 10,00 tires for agricultural and industrial machinery per day at maximum capacity, but this is still not enough to meet the demand. To make up for the difference, Yang plans to set up a 20,000-unit-per-day line for the production of motorcycle tires at its auto-tire plant in Kunshan, Jiangsu Province.

Kenda is carrying out a second-stage expansion of its passenger-car radial-tire capacity in Kunshan, and has decided to pour US$75 million into the construction of a third-stage plant there. With the completion of the third stage in 2005, Yang reports, the company will be able to turn out seven million radial tires a year. Kenda is also in talks with a major North American tiremaker about the establishment of a US$100 million tire plant in Kunshan.

Deliveries to Japanese bike assemblers there will soon begin; the recent order for 1,000 bicycle tires a day that Innova reports receiving from a Japanese buyer is aimed at filling demand in the Chinese market.

The company is carrying out a second-stage expansion project at its bicycle-tire plant in Pinghu, Zhejiang Province; when finished, this will boost the company's daily bicycle-tire capacity from the current 50,000 units to 70,000. The company also plans to expand the capacity at its motorcycle and industrial tire plants in Pinghu, boosting daily production to about 5,000 motorcycle tires (from 1,200 now) and 10,000 industrial tires. All of the firm's expansion projects are scheduled for completion by the end of 2004.