Hankook Contemplates China Price Rise

The largest manufacturer of tyres in China by market share, Hankook Tire, is contemplating price increases in this market to offset the costs of oil and raw materials. CEO of the company holding a 25 per cent market share in China, Choi Jin-wook, made comments to this effect on April 21. Choi also said the company expected its sales volume to increase in China by about 20 per cent this year, a stronger rate than the anticipated industry wide 15 per cent growth.

The Reuters news service has quoted Choi as saying “the company has not decided on the details. We are considering a price hike, although nothing has been decided.” The Reuters report also indicated that Hankook was looking for other ways to cut costs, such as through higher productivity.

In spite of an anticipated higher than industry average growth in sales volume, Choi expressed caution regarding future growth in China’s automotive market. He was reported as saying higher prices and the Chinese government’s tightening of monetary policy, directed towards reducing inflation, will eventually reduce demand for cars. Financial market turmoil was cited as another potential car purchasing deterrent.

“The outlook for China’s auto market is not that rosy, as there are some signs of a slowdown in growth,” said Choi. “The growth is expected to slow to single-digits from 2010 when the market gets saturated.” Hankook’s response to the possibility of reduced demand has been an expansion of premium tyre offerings, aimed at customers whose purchases are less price sensitive and thus more immune to any economic slowdown.

Choi also said Hankook was currently holding talks with a German luxury vehicle manufacturer regarding OE tyre supply, however he did not elaborate on this news. Hankook China’s first step into the Germany luxury vehicle segment came in June 2007 with the supply of Chinese made tyres to Audi.