Kumho Tire – 3 years of “continuous operating losses”

On 7 November, the Shanghai Stock Exchange published the 2023 credit rating report for Qingdao City Construction Investment (Group) Co Ltd. (Qingdao City Investment), the holding company of Qingdao Doublestar and Kumho Tire. Our sister publication Tyrepresschina.com has shared some of the key details contained within the report, which is dated June 2023.

The report states that “Kumho Tire has been affected by factors such as labour union campaigns.” Production and sales “have continued to decline in recent years and its production capacity utilisation rate has been low.” Specifically, Kumho Tire has “sustained operating losses in the last three years, with sales volume continuing to decline and operations heavily impacted by the union movement.”

According to the credit rating report, Kumho Tire plans to “reverse the sales decline through sales channel integration,” however it “remains to be seen how its operations will improve.”

Qingdao City Investment’s 2023 credit rating report only provides production information for Kumho Tire’s semi-steel radial tyres. Capacity for these products declined from 56.02 million to 55.17 million units between 2020 and 2022, while production increased from 37.29 million to 47.04 million units during this timeframe. As a result, capacity utilisation for Kumho semi-steel radials increased from 67 per cent to 85 per cent. The report made no mention of production and sales figures for other Kumho products, such as all-steel radial tyres.

Doublestar under pressure

In addition, the credit rating report indicates that Qingdao City Investment’s tyre business is facing greater pressure to improve operating efficiency. Qingdao Doublestar’s “per capita output value is at a lower level” than some of its peers. Doublestar cut production of all-steel radial tyres by more than one million units and also lowered production of semi-steel radials by nearly one million units between 2020 and 2022. The company manufactured 3.03 million all-steel radials and 9.39 million semi-steel radial tyres last year.

It is worth noting that Qingdao Doublestar expanded its capacity for semi-steel radial tyre production in 2022, from 14.5 million to 17 million pieces. Against the background of declining production, Doublestar’s increase in semi-steel radial production capacity caused the capacity utilisation rate to drop from 71 per cent in 2020 to just 55 per cent in 2022.