Two of the nation’s major tire manufacturers are planning to expand production this year to take advantage of a stable supply of raw materials, such as crude oil and rubber, market sources said yesterday.
Cheng Shin Rubber Industry Co (正新橡膠), the world’s ninth-largest tire supplier, said that as demand for vehicles in emerging markets increases, expansion of its production capacity is necessary for the company to ride the uptrend.
Local rival Kenda Rubber Industrial Co (建大輪胎) said it aims to rank among the world’s top 20 tire makers by expanding its production capability.
Market analysts said that due to stable raw material prices — natural rubber and synthetic rubber costs are expected to remain low for the rest of this year — manufacturers could see significant cost savings.
Cheng Shin, which accounts for 11 percent of the world’s tire market and owns four brands — CST, Maxxis, Sakura and Presa — expects production of tires for passenger cars and trucks to increase 20 percent this from a year ago.
In addition, Cheng Shin said production of tires for agricultural and industrial vehicles is expected to double this year. The company also aims to boost production of bicycle tires by more than 8 percent.
Cheng Shin said it would seek to make headway in emerging markets such as China, Indonesia and India, where domestic demand has been growing steadily.
Market analysts said that while the pace of economic recovery in US and European tire markets remains sluggish, emerging markets, in particular China, which boasts a large car market of about 20 million units a year, will drive growth in tire sales.
Cheng Shin’s production expansion plans for this year follow the company’s adding of production lines to its plants in China’s Changzhou and Xiamen. The tire supplier said it aims to become the world’s eighth-largest tire supplier in the near future.
Kenda said its new plant in Tianjin, China, is scheduled to start commercial production next month.
It also plans to spend US$30 million as an initial investment to build a production base in Huizhou, China.
Market analysts said that as a result of their expansion plans, Cheng Shin and Kenda are likely to see their bottom lines strengthening this year.
In the first quarter of the year, Cheng Shin posted NT$1.50 in earnings per share (EPS), up from NT$1.18 in the same period of last year, while Kenda’s EPS for the first quarter stood at NT$1.05, up from NT$0.68 a year ago.