Hankook Management Target 11 per cent Price

Hankook Tire’s management are confident they can raise confidence in its ability to their products’ global average selling price by between seven and eight per cent in 2010. According to an investors note published by Deutsche Bank, additional price hikes are possible, with Hankook’s management said to be targeting an 11 per cent increase.

According to the financial analysts, Hankook’s confidence of being able to successfully implement the prices increases is based on the fact that “demand in key markets remain supportive expecting.” In real terms this means managers expect year-on-year sales volume growth of around 14 per cent this year with 100 per cent utilization.

Hankook reportedly raised the average selling price in its profitable domestic market by 3 per cent in January. There are said to be plans to raise domestic prices another 5 per cent in the first quarter of this year, followed by another 5 – 6 per cent in second half. The company is said to be confident about raising prices in the Korean, US and Chinese markets (in that order) in the second half of 2010.

Deutsche Bank points out that new capacity in Hungary and China should be a key earnings driver from 2011. In the Chinese market, Hankook reportedly plans to reduce exports to take advantage of strong pricing.

In addition to the de-segmentation effect, which has helped Hankook increase the volume of unit sales in the European markets, Deutsche Bank reports that the “ongoing customer trend to trade down to cheaper brands in the US market, and higher duties on imports from China, are particularly helping second and third tier brands like Hankook.”

In Europe Hankook reportedly plans to improve its distribution network by focusing on the expansion of retail outlets. Hankook is believed to be targeting a 14 per cent year-on-year increase in global tyre sales in 2010 (80 million units).