[Edaily Reporter Kim Hyung-wook ] In June of this year, NEXENTIRE began supplying original equipment (OE) tires to Chinese electric vehicle manufacturer BYD for its models exported to Europe and Australia (Dolphin Surf and Seal 6). With this, all three Korean tire companies—following Hankook Tire and KUMHOTIRECO.,INC—have now begun supplying OE tires for new Chinese vehicles destined for export.

As such, there has been a recent increase in the adoption of Korean tires for Chinese electric vehicles exported overseas. While Chinese electric vehicles’ push into overseas markets is heightening a sense of crisis within the Korean automotive and battery industries, Korean tire manufacturers are viewing this as a new growth opportunity. However, experts advise that measures to maintain current competitiveness are urgently needed, as Chinese tire manufacturers—which have grown by leveraging their domestic markets—are also rapidly enhancing their technological capabilities.

◇ K-Tire Factory Utilization Rates on the Rise Due to Export Demand from China

An analysis of the business and semi-annual reports of the three major Korean tire manufacturers (Hankook, KUMHOTIRECO.,INC, and NEXEN) conducted by Edaily on the 10th revealed that the capacity utilization rates at their Chinese plants have risen rapidly over the past three to four years.

In the case of NEXENTIRE’s Chengdu plant in China, the capacity utilization rate rose from 85.8% in 2022 to 96.4% last year. At Hankook Tire’s factories in Jiaxing, Jiangsu, and Chongqing, China, the ratio of actual production to production capacity also increased from 82.3% to 87.7% over the same period, rising further to 88.2% in the first half of this year. Although KUMHOTIRECO.,INC does not disclose factory utilization rates by country separately, the overall utilization rate of its overseas factories—including those in China, Vietnam, and the U.S.—reached 100.3% last year.

The industry explains that local factories are becoming increasingly busy as demand for original equipment (OE) supplies for Chinese vehicles—particularly electric vehicles (EVs) intended for export—has coincided with the explosive growth in Chinese EV exports.

In fact, during this period, Hankook Tire began supplying OE tires to major local automakers such as BYD, Denza, Li Motor, and Ceres. KUMHOTIRECO.,INC is also supplying OE tires for Chery’s “Omoda E5” electric vehicles destined for export to Australia. NEXENTIRE also joined the ranks of OE suppliers for Chinese electric vehicles in June of this year by beginning to supply OE tires for BYD’s electric vehicles destined for export to Europe and Australia.

◇Technology and Brands That Are Difficult to Reproduce Serve as Entry Barriers

Although Chinese automakers have rapidly in-sourced the production of electric vehicles and their core components—batteries—they still opt for Korean tires for export models. This is because tires are products directly linked to safety and are inherently difficult to replicate.

Tires are made by blending natural and synthetic rubber with various materials, such as silica, and combining the rubber with metal and fiber reinforcements. The vulcanization process—which applies heat and pressure to impart the necessary properties to the rubber—is also a form of know-how that is difficult to replicate based solely on the tire’s visible tread pattern and shape.

Professor Lee Ho-geun of the Department of Future Automotive Engineering at Daedeok University explained, “While a car can be taken apart piece by piece to calculate its cost and be replicated exactly, tire design and manufacturing technology cannot be replicated simply by dissecting an existing product.” He added, “If Chinese automakers want to enter markets that prioritize safety—such as those in Europe—they have no choice but to use products that guarantee a certain level of performance.”

An industry official said, “We estimate there is still a gap of about five years in terms of design and manufacturing technology.” The general consensus in the industry is that if the performance and price of high-end tires—such as Michelin, Bridgestone, and Pirelli—are set at 100%, K-Tires offer products with over 90% of that performance at around 85% of the price, whereas Chinese tires currently offer less than 60% of the performance but are priced at around 70% of the level.

Amid this situation, the Chinese government appears to be effectively recognizing foreign-made tires—including those from South Korea—as part of its electric vehicle supply chain. While the Chinese government has pursued a policy of excluding foreign products over the past decade—along with massive subsidies—to grow its domestic electric vehicle and battery industries, it has, in contrast, included the production of high-performance radial tires on its list of industries encouraged for foreign investment.

◇The Challenge of Chinese Companies Closing the Gap Amid EU Tariffs

That said, the outlook is not entirely rosy. The European Union’s (EU) tariff measures on Chinese tires pose an immediate challenge. In July of this year, the EU began imposing anti-dumping duties ranging from 4.3% to 45.3% on Chinese tires, and it is highly likely that additional countervailing duties will be imposed next month.

The three tire companies plan to alleviate the tariff burden by redirecting supplies from their Chinese factories to third countries, such as Europe; however, to maintain current capacity utilization rates at their Chinese plants, it is urgent to expand the supply of new-car and replacement tires for the Chinese domestic market. Although Hankook Tire began supplying original equipment (OE) tires for Xiaomi’s first electric SUV, the “YU7,” for the domestic market last July, its presence in the local Chinese market—particularly in the replacement tire market, where price competitiveness is crucial—is still considered minimal.

In the medium to long term, the technological catch-up by Chinese companies that have expanded their scale poses the greatest threat. China’s leading tire companies, Zhongche Rubber and Sailun, ranked among the top 9–10 global tire companies based on last year’s revenue. Using their domestic market as a springboard, they have surpassed KUMHOTIRECO.,INC (12th) and NEXENTIRE (18th). Combined, the two companies’ revenue even exceeds that of Hankook Tire (7th). Furthermore, companies like Sailun are making inroads into overseas markets, having recently begun supplying original equipment (OE) tires for Chinese electric vehicles exported to Europe.

Professor Lee stated, “Although a technology gap remains between South Korea and China in the tire sector, Chinese companies with secured capital are rapidly catching up by expanding their R&D and facility investments,” adding, “Along with expanding supplies to Chinese automakers, it is necessary to maintain brand competitiveness in global premium markets such as Europe and the United States.”