Hankook Going up a Gear in Europe

During the recent Reifen Essen exhibition Tyres & Accessories met with Hankook vice president and Hankook Tire Europe GmbH chief operating officer, Seung Do Jin; along with European vice president sales and marketing, Hee Se Ahn. The meeting followed some particularly impressive full-year results that saw the company buck the trend (compared with similar businesses) and post a market leading profit margin of 8.1 per cent. It also followed a particularly impressive result in the recent Auto Motor und Sport tyre test. The result? Hankook is gearing up to announce some big wins in the European OE business, which signal the company’s intentions for future growth.

Asked what led to the company’s particularly impressive first quarter sales, Mr Jin explained that one reason is they came “as a result of becoming a marketing driven company.” European sales growth is particularly driven by sales in the UHP segment, he added, and according to Mr Jin, the leading car manufacturers based in Germany continue to drive these trends. So, with Hankook’s Dunaujvaros, Hungary production plant currently producing around 4.5 million passenger car tyres a year (15,000/day), the South Korean-based manufacturer is increasingly ready to go up a gear and carve out its place in the European OE business.

At this point it is worth pointing out Hankook’s recent success in securing some pretty high profile OE contracts with volume manufacturers such as Volkswagen. The word in Essen was that Hankook is very close to sealing an OE contract with Audi, a deal Hankook “is convinced” will be completed by the end of 2008. This would see the South Korean manufacturer supply both the A3 and A6 models in Germany and the A4 and A6 models in China. The contract would involve supplying 16, 17 and 18-inch tyres in “relatively small” quantities to begin with. Hankook is also said to be in discussions with BMW and Mercedes (who the company already supplies spare tyres to), not to mention Toyota.

European proving ground?

Coming back to Mr Jin’s earlier comment that Hankook’s positive results at least partly come down to its development into a more marketing aware company, rumour has it that Mercedes actually approached the South Korean company with reference to an OE deal on the S-Class, following Hankook’s impressive Auto Motor und Sport tyre test win.

With the market (and various proposed pieces of legislation) increasingly focussing on rolling resistance and fuel economy, research and development is as important as ever for Hankook. The company’s particular attention on market-focused R&D is demonstrated in its increased use of European testing facilities – including sites in Vienna, Austria and Barcelona, Spain. Mr Jin explained that Hankook has invested a “huge” amount of money in gaining the exclusive use of a new specially made handling circuit all-year round. Sooner or later this policy would result in “our own proving ground.” Mr Jin hinted.

Seung Do Jin, himself a former Hankook UK managing director, reserved particular praise for Hankook UK’s growth under the leadership of Richard Page, and the rapid development of Hankook’s market position in the UK truck tyre segment. Following the launch of four new truck tyres at April’s CV show (including one winter fitment); and two more in Essen, Hankook is experiencing something of a rapid ascendancy in this particular area. However, with more ‘economically competitive’ products being imported into the UK than ever, the obvious question is how does Hankook feel about an influx of products competing on price?

“At the moment I am not worried about the Chinese catching us up. There is already a technical knowledge gap. We invest 5 per cent per year in research and development, so we can learn faster than they can follow,” Mr Jin answered. So does this mean Hankook is likely to follow its construction of a passenger car tyre facility in Hungary with European truck and bus capacity?

According to Mr Jin it all depends on the market situation. However, he did point out that, despite the fact that production costs are up, there is still space on the Hungarian PCR production site. And therefore there is always the option of adding truck and bus tyre capacity “in a few years time.”