Kumho Tires’ CEO speaks with Tyres & Accessories
This 50th anniversary year provides an ideal opportunity to look back on half a century of Kumho Tires and its business up to the present day. In an interview with Tyres & Accessories the South Korean manufacturer’s chief executive officer, Jong-Ho Kim, shares how the company has developed, what plans it has for the near future and the importance of football sponsorship.
Tyres & Accessories:
Kumho Tires has been in the tyre business for 50 years. What are its most important achievements during this time?
Jong-Ho Kim:
We started from making 20 units of tyres a day in 1960, but we have significantly grown to produce 180 thousand a day (65 million units per year). In 1965, we first exported tyres valued at US$7,700 to Thailand, but now the volume has greatly increased to reach $1.8 billion, exported to around 180 countries worldwide.
Since we were ranked as the ninth global top tyre manufacturer in 2003, Kumho Tires has kept maintaining its position within the top ten. Celebrating the 50th anniversary of foundation this year, we are still the youngest player among those top ten companies.
As technical innovations are our power in competing with other international tyre makers, the most important achievements for us are those many ‘world’s first’ technologies introduced through long-term research and development efforts; the world’s first 32-inch tyre using technologies for motor sports racing tyres and the world’s first 15 series tyre for super cars.
Tyres & Accessories
In recent years Kumho Tires has become a global player. In which region do you see the biggest need for growth in the near future and how do you intend to achieve this?
Jong-Ho Kim:
Kumho Tire mainly exports to major tyre markets such as North America and Europe and is advancing market share in Asia and Middle East. In addition to our factories in Korea, we have four in China and one in Vietnam to meet the demands of overseas markets. In order to increase sales within Asian new emerging markets, the Middle East and South America, which are comparatively smaller markets, we are actively utilising new product events as well as local promotions. Using localised sales strategy, we plan to launch and provide products that meet local demand.
Tyres & Accessories:
What does your general expansion plan for the next five years focus on?
Jong-Ho Kim:
We are continuously examining the possibility of expanding overseas factories and will improve global marketing activities and research and development standards in order to boost our brand awareness and ultimately to increase our global market share.
Tyres & Accessories:
Have you already decided where to build your next tyre factory after the construction of the US facility? And when will production in the US commence?
Jong-Ho Kim:
In a short period of time, we plan to increase our tyre production through expanding the assembly lines in Vietnam, which manages the demands for the overseas markets. For the mid and longer term, we expect to jump into a leading global position by resuming the construction of the manufacturing plant in Georgia, US.
Tyres & Accessories:
What is Kumho’s general growth plan for its original equipment business in Europe and other regions?
Jong-Ho Kim:
Those OE partners play very important roles in our global strategy. Sales from OE supply takes 30 per cent of Kumho Tires’ total revenues (and OE sales in overseas markets account for 30 per cent of total OE sales). But it is more than just a simple number. Lots of end-users still tend to re-purchase OE manufactured tyres which were first installed when the cars were released. Also, it means that the quality of Kumho’s tyres gets the credit from the automobile makers.
Furthermore, we can easily make inroads into a new market through our partnership with renowned car makers. For the first time among the Korean tyre manufacturers, Kumho Tires succeeded in making an OE deal with Mercedes Benz (in 2007). With the reliability and quality we accumulated through this relationship, we could expand our supply to Mercedes Benz into the area of truck and bus radial tyres (in 2009) for the first time in the local tyre industry. Currently, we are supplying OE tyres to Mercedes Benz, Volkswagen, Ford and Chrysler.
Tyres & Accessories:
Along with Korea, China and the US markets, Kumho also has a strong foothold in Europe. What is special about the European tyre market? How can your European representation help you in other markets in terms of technology, marketing and distribution?
Jong-Ho Kim:
Thirty per cent of Kumho Tire’s total export income is from Europe. Europe is an important market in terms of strategy rather than market share. Europe is traditionally an advanced market containing a rich history of the car industry and its related industry, including tyres, thus expanding brand awareness and being acknowledged for quality in this market is crucial for raising brand value within the global market. Due to the Korea-EU FTA that is expected to take effect this year an increase in sales within Europe, including OE, is expected.
Tyres & Accessories:
Kumho Tires is a market leader in China. What is important about China: the country as a huge market for potential sales or as a place to cheaply produce tyres for the world?
Jong-Ho Kim:
Since the 1990’s we have tried to secure manufacturing facilities and have made investments in China. We don’t see China as just a manufacturing base, but as an important a market as our domestic market and we appreciate its high growth potential. We decided to pioneer new markets and dominate them in advance as we saw there are some practical limitations to overcoming established leaders in existing markets. Our sponsorship of Manchester United, the English premium football league team, is also the result of a strategic decision that China is the country where the biggest numbers of MU FC fans live (about 60 per cent of all MU fans live in China and South-East Asia, an estimated 190 million people).
Kumho Tires has the number one market share of PCR and LTR tyres in China. Today, we operate four manufacturing plants in China including Nanjing, Tianjin, Changchun and Nanjing/TBR.
Tyres & Accessories:
Motorsport is not possible without tyres. How do you see Kumho Tires’ current commitment to motorsports? Will there be changes in the near future? What role does motorsport play in your global marketing?
Jong-Ho Kim:
The passion of our staff toward motorsports is beyond your imagination. As we are a relative newcomer with the shortest history among the global top ten tyre makers, we need to compete in the global market with our technical power, and motorsports is the area where we can show off our capabilities. We started developing tyres for auto racing in the 1990’s, and have now become the number one brand in the global F3 tyre industry, taking 40 per cent of market share. We already completed the development of F1 tyres in 2007 and now watch for an opportunity to enter into the F1 market as well. Kumho Tires has greatly contributed to the Korean motorsports industry during its rather short history. It is the only Korean company to own technology to produce tyres for F1 vehicles.
Tyres & Accessories:
What benefits to you gain through your involvement in other sports, such as football? Will you continue your involvement in this area?
Jong-Ho Kim:
As the markets in Europe and China became more important, in 2007 we made a platinum sponsorship agreement with Manchester United, the world’s leading football club, deciding that a partnership could produce a synergy effect between the two of us. In 2007, Kumho Tires could achieve magnificent marketing effects valued at 20 billion won (£11.1 million) from this sponsorship and media exposure due to the high popularity of MU, including Korean player Jisung Park. In 2009, the sponsorship’s value reached over 30 billion won.
We give a special meaning to this sponsorship as it could significantly enhance our brand power and corporate image which can’t be calculated with money, especially through the MU Safe Player campaign to focus on traffic safety for children.
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