Nexen Tire signs Czech plant deal, ups investment to $1.17 billion

Following Tyres & Accessories’ reporting of Nexen Tire Corp’s decision to build a greenfield tyre production plant in the Czech Republic back in March 2014, the company has signed a deal with the Czech government.

On 27 June the Korean Yonhap news agency reported that tyre company negotiated a 1.2 trillion won (US$1.17 billion) to build the factory. The specific number here is significant because the details issued to T&A in March only referred to investment of $800 million dollars. If the figure quoted by Yonhap is correct (and company representatives suggest it is), either Nexen has significantly upped its investment – or as is not unusual in such cases – it could mean that the Czech government has offering some $300 million in investment support. Either way, if the numbers are right it undoubtedly means Nexen is now set to build a bigger factory that it initially spoke of.

According to the reports, the new plant will be built on 65,000 square meters of land in Zatec in the northwestern part of the country. Again if confirmed, this would be a departure from the plans initially released to T&A, which suggested the Korean manufacturer was eyeing a plot of land in the city of Nošovice, in the east of the Czech Republic.

The Yonhap report says construction on the plant will start once the contract gets approval from the European Commission. Capacity is then expected to reach 12 million tyres a year from 2018. Nexen already sells some 8 million tyres in Europe each year, more than a quarter of which are sold in the UK under various brands.

However, the factory is not just for the replacement market. On the contrary it is a strategic effort to win more OE business – specifically with Korean businesses Hyundai Motor Co. Kia Motors Corp., which have car assembly lines nearby, but also with existing OE customers Volkswagen AG and Skoda Auto and some even more highbrow OEMs.

Nexen currently has two plants in its home country and another in Qingdao, China, and had been eyeing an expansion into Eastern Europe for some time.