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Kumho Tire's Chinese "ambition"
In 2008, Kumho Tire aimed to capture 20% of the market share in both the retail and OEM sectors, positioning itself as the leading tire company in China. Liu Chengzhe, managing director and sales head of Nanjing Jinhu Tire Co., Ltd. (also known as Kumho Tire), shared these goals during an interview with a newspaper. This ambition aligned with the broader objective of the South Korean Kumho Group to rank among the world’s top five tire companies by 2010.
Despite the challenges posed by a downturn in the domestic auto market and a significant hit to the OEM sector, which is closely tied to automobile manufacturers, Kumho Tire remained committed to its targets. Liu emphasized that production was not affected, thanks to the global export network of the Kumho Group. Domestic output was being absorbed through exports, ensuring that the company's expansion plans would continue. By early 2006, the company aimed to reach a production capacity of 12 million units per year, with plans for a new plant already in the design phase.
This goal has not changed, even after the company faced setbacks in 1999 due to the Korean financial crisis. At that time, Kumho Group sold Tianjin Jinhu to Japan’s Bridgestone Tire Company to raise cash for debt repayment. The sale was reportedly done without negotiation, leading to the collapse of Kumho’s operations in North China. Many employees left, and the once-thriving sales channels in the North were handed over to Bridgestone, forcing Kumho to focus on the southern market.
However, the rapid growth of the Chinese auto market since 2002 provided new opportunities. After some hesitation, Kumho Tire seized the moment and began to rebuild its presence. In 2002, the Beijing office was established, and in 2003, the company officially launched its full-scale operations in the northern market. “Our goal is to catch up with the ‘Big Three’—Michelin, Bridgestone, and Goodyear,†Liu said. While Kumho achieved a high volume of sales in 2003, reaching nearly 5.4 million units, low pricing kept total profits lower than those of the industry leaders.
With China’s tire market booming, many companies experienced unprecedented demand. Industry experts predicted that China’s tire production would reach 1.6 billion units in 2005. As the market expanded, global tire giants such as Michelin, Bridgestone, Goodyear, Kumho, Hankook, Yokohama, Sumitomo, Giti, and Golden Lion all entered the scene.
Michelin dominated the high-end segment, while Goodyear focused on mid-range and upwards, and Bridgestone offered a broad range of products at different price points. Kumho, positioned in the second tier, aimed to close the gap. “There is no problem in catching up in terms of output,†Liu said. Despite its 5.5 million unit annual production capacity, supply shortages still occurred, forcing the company to reduce exports.
The company also invested heavily in expanding its production capabilities, including a capital increase of over $80 million. This would boost the annual production of semi-steel and all-steel radial tires, along with advanced technologies like low-profile, high-speed tires. However, brand awareness remained a critical challenge. Low brand recognition led to low pricing and limited profitability, despite strong sales volumes.
To address this, Kumho introduced the PRIMA line of tires, specifically designed for China’s challenging road conditions. The product received positive feedback, with sales increasing by 70% this year. Additionally, Kumho became a supplier for major automakers such as Beijing Jeep, Beijing Hyundai, FAW, Chery, and Shenlong, with many well-known brands using its tires.
In 2004, Kumho launched a comprehensive brand strategy, introducing high-end, mid-range, and value-oriented lines. The shift to the replacement market became crucial, as the automotive market stabilized. With a projected production capacity of 12 million units annually, Kumho needed to find ways to manage surplus production. Sales channels became a key focus, but attracting dealers proved difficult due to low profit margins.
To improve engagement, Kumho worked closely with distributors, offering better profit margins and investing in training. The company also prioritized customer relationships, sending birthday greetings and gifts to store owners. With 1,000 Prima Stores across the country, Kumho continued to strengthen its retail presence.
Sports marketing also played a vital role in boosting brand visibility. Liu highlighted the effectiveness of motorsports, particularly events like the Paris-Dakar Rally and F3 World Championships. Although Kumho avoided the costly F1 circuit, it participated in other racing events to build brand reputation and showcase tire performance.
Looking ahead, Kumho planned to explore opportunities in Chinese football and basketball, aiming to connect with large fan bases and long-duration events. The company sought to maximize its brand exposure through strategic marketing efforts.