Cheng Shin Announces Plans for New Tire Plants in Indonesia

Cheng Shin Rubber Ind. Co., Ltd., one of Taiwan's top rubber-tire manufacturers, recently announced plans to build a new factory in Indonesia for making motorcycle tires and passenger car radial (PCR) tires, with construction scheduled to begin next March.

H.G. Lee, Cheng Shin's assistant vice president, made the announcement at his company's shareholders' meeting. First-stage construction is expected to be completed in March 2016, and the new plant's targeted maximum daily production capacity will be 40,000 motorcycle tires and 16,000 PCR tires.

Cheng Shin estimates that investment in the new motorcycle-tire factory will be about NT$3 billion (US$100 million), excluding land cost, and that total investment in the entire plant complex in Indonesia (including the PCR tire facility) will be about US$300 million.

The Indonesian facilities will be Cheng Shin's third plant complex in the Association of Southeast Asian Nations (ASEAN) area, following others in Thailand and Vietnam. The Taiwanese tire maker said that products from the new factory will initially be sold on the local and international replacement aftermarkets; in the future, the Indonesian original equipment (OE) market will also be targeted.

Y.L. Lo, another of Cheng Shin's assistant VPs, reported his company has won orders from Toyota for the supply of PCR tires for Taiwan-assembled Toyota Altis sedans for export to the Middle East. In addition, Cheng Shin now also supplies its own-brand "Maxxis" PCR tires for Nissan's New March sub-compact cars that are assembled in Thailand and sold on the domestic market or exported to Japan, Indonesia, and India. The estimated annual demand from each of the two automakers is about 100,000 tires, the company said.

Cheng Shin has been enjoying a smooth growth in sales in some of its overseas markets. In the first seven months of this year, for example, the firm's tire exports to Saudi Arab totaled 1.5 million units worth about US$100 million. In Southeast Asia, Cheng Shin's second own-brand, "Presa," has been performing quite well in an auxiliary role to the company's internationally known "Maxxis" brand.

Under the impact of negative factors such as the demands of environmental protection and the reduced transportation of construction materials (largely as a result of China's policy of cooling down the housing market), Cheng Shin's tire sales in China remained stagnant for a certain period this year. However, said VP H.M. Wu, these negative factors are expected to be temporary and Cheng Shin has begun more aggressively developing bus-tire sales to compensate for the decline in the truck-tire segment.

Lo also announced at the shareholders' meeting that Cheng Shin would sponsor NBA player Jeremy Lin's new team, the L.A. Lakers, for the purpose of further boosting its brand image.