Is Cheng Shin Up for Another China Tire Plant?

Taiwanese tiremaker Cheng Shin Rubber Co. is reported to be considering building its seventh plant in China.

On June 19, the Taipei Times printed comments made to this effect by company vice president Wu Hsuan-miao following Cheng Shin's annual general meeting the previous day.

"We will come up with a concrete plan on the construction of a new plant early next year, when the global demand for tires is set to stabilize," Wu told the Taipei Times. He added that Cheng Shin, which manufactures the Maxxis, CST, Sakura and Presa brands, needs to expand its production capacity as its existing plants are expected to be running at full capacity by the end of 2013. Overall current capacity is 90%.

In a report issued to shareholders, Cheng Shin also said it anticipates a year-on-year rise in revenue due to increasing emerging market vehicle sales and lower raw material costs.

“Demand in China and other emerging markets, such as India and Indonesia, is growing faster than in developed countries,” stated the report. And sales to Europe and North America are said to only account for 9% of Cheng Shin’s total sales, leaving it much less exposed to regional weakness than many of its rivals. Wu Hsuan-miao estimates the company’s combined sales to China and other emerging markets to be between 70% and 80% of the total NT$12.6 billion revenue in the January to March quarter.

With the completion of three new factories in China and one in Taiwan in the past year, the company’s total tire sales are expected to reach 39.2 million units this year, a more than 300% increase from 11.26 million units the previous year, the company said. Revenue and earnings forecasts for this year were not given at the meeting.