Continental Aims to Complete Chinese Plant Plans by Q2

Continental AG representatives say they are aiming to finalise plans for a 300 million euro investment in a tyre plant in China by the second quarter of this year. Speaking at a news conference marking the official opening of the company’s Asia-Pacific headquarters in Shanghai, the executives said that Continental expects to double Asian sales within five years for its automotive systems division.

The proposed plant is expected to cost in excess of 300 million euros and will produce 7 – 9 million automobile tyres and 2 million truck tyres per year at full capacity, the AFX news agency reported.

“Presently, Continental Automotive Systems generates 500 million euros of annual sales in the Asian region…by 2010, we want to double this figure to 1 billion euros,” said Jay Kunkel, president of the Asia Region at Continental Automotive Systems. However, Kunkel denied the moves was an example of shifting production out of high cost markets. “We do optimise our global footprint but…the investments here in Asia are mainly intended to serve the market here in Asia,” he said.

Peter Hofmann, director of Asia-Pacific sales and marketing for Continental Sime Tyre, said the company is likely to approve the tyre project in the second quarter. He said Continental is looking at sites in several provinces and had not yet decided whether it would operate the plant as a wholly owned unit or if it would take in a joint venture partner.

Continental Sime is a joint venture with Malaysia’s Sime Darby. Hofmann admitted that the company was relatively slow at entering the China market, largely due to its earlier decision to enter the Malaysian market

“We have established a very solid market share in Malaysia with about 50 per cent and have made major investments in local production there, so it was basically a matter of which opportunity came first for us, China or Malaysia,” Hofmann said.

Continental currently sells about 130,000 tyres per year in the Chinese market, AFX reported.