Hankook aiming for 25% of local market through Indonesian plant

In June Hankook Tire held a groundbreaking ceremony for a new tyre plant in Indonesia. While the Korean manufacturer has already shared plans to service the North American and Middle East markets from this facility, executive vice-president Hyun Bum Cho has told Indonesian journalists that it intends to secure a 25 per cent share in the domestic market through output from the plant.

Quoting Cho’s comments during a press meeting held with Indonesian journalists in Seoul, The Jakarta Post writes: “There are so many motorcycles in Indonesia. We did studies to predict, for example, how many motorcycle users will buy small or family cars in the next 20 years given the country’s economic growth. We also hope to double production within five years and win 25 per cent of the Indonesian market.”

Cho’s confidence in securing a quarter of the market appears to stem from the tyre maker’s experience in China. He notes that when Hankook established its first factory in China in 1999, its market presence there was similar to its current share in Indonesia: “Now, Hankook is the number one tyre brand in China.” The executive vice-president adds that Hankook intends to focus upon expanding its distribution network and increasing brand awareness in Indonesia. While he did not divulge much detail about Hankook’s planned marketing strategy, he told The Jakarta Post that the company “will surely sell everywhere Bridgestone is selling or Gajah Tunggal is selling.”

Initially an emphasis will be placed on export markets, however. Cho stated that at first 70 to 80 per cent of tyres produced in the new Lippo Cikarang in West Java will be sent to Middle Eastern and North American markets; when annual production reaches 18 to 20 million units Hankook aims to focus more on Indonesia and Asia. “We plan to have 30 per cent of our production sold in Indonesia, 11 to 20 per cent in ASEAN and the rest for export,” he comments.

Some eighty per cent of Lippo Cikarang’s production will be dedicated to passenger car and light commercial vehicle tyres, with truck and bus tyres accounting for the remainder. Cho states that, despite the enormity of Indonesia’s motorcycle market, Hankook does “not have plans” to sell locally-produced motorcycle tyres there. He adds however that this option “is not completely off the table.”

According to Hankook, the first stage of project the involves a US$353 million investment and the Lippo Cikarang plant will enter operation with an initial annual production capacity of some six million passenger car and light truck tyres. By 2014 the factory should employ around 1,400 people, and Hankook expects to add a further 2,800 jobs by 2018. In addition to providing local employment, Hankook intends to utilise Indonesian raw materials in production as much as possible. “Initially, we will use 20,000 to 30,000 tons of natural rubber, all sourced from Indonesia,” Cho told the newspaper. “Eventually, when production is much larger, by 2018 perhaps we will use 50,000 tons of Indonesian rubber…We only plan to secure raw materials from outside Indonesia only when the materials are unavailable or in short supply.”