Tire makers commit $7.5 billion globally to new plants, capacity expansions

The world's leading tire makers committed more than $7.5 billion in the past year toward new plants and capacity expansions, representing more than 82 million units of new annual car tire and 7.5 million units of new truck/bus tire capacity.

The investment sum is slightly greater than the 2016-17 total, but it balloons to nearly $10 billion when the value of recent acquisitions — Group Michelin's pending $1.45 billion purchase of Camso Ltd. and Qingdao Doublestar Tire Co. Ltd.'s $620 million acquisition of a controlling interest in Kumho Tire Co. Ltd. — is taken into account.

This is the second straight year that the capacity expansions topped the 80 million/7 million unit mark.

The expansions are balanced by just a one plant closing of note — Group Michelin's 49-year-old truck tire plant in Ballymena, Northern Ireland — although tightening economics in China is prompting temporary shutdowns and slow downs there.

This story appears in the Aug. 27 print edition of Tire Business.At the same time, China's Wanli Group has put its plans for a $1 billion manufacturing complex in the U.S. on hold.

Shandong Linglong Tire Co. Ltd., China's third largest tire maker and No. 17 worldwide, is No. 1 on the capital spending list for the past year, committing $1.7 billion in recent months to build a pair of plants, one in China and one in Serbia. The plants' combined annual capacities total more than 30 million tires — nearly 26 million passenger, 4 million truck/bus and up to 80,000 OTR tires — that will be coming on stream over the coming six years.

The company broke ground recently on its fourth plant in China, an $875 million project in Hubei Province, and disclosed Aug. 21 its decision to build its second overseas plant, a $994 million project in Serbia.

Saudi Arabian National Tire Co. (NTC) is a close second with its plan for a $1.6 billion tire plant in Saudi Arabia.

United Arab Emirates-based NTC has struck a deal with South Korea's Samsung Engineering for the engineering, procurement and construction of its first ever plant, which would be rated at 20 million units a year with production to start by year-end 2020.

Other greenfield tire projects announced in the past year include:

•  Apollo Tyres Ltd. in Chittoor, Andhra Pradesh, India;CEAT Ltd. in Tamil Nadu, India;
•  P.T. Gajah Tunggal of Indonesia and Inoue Rubber Co. Ltd. of Japan in Indonesia;
•  Triangle Group Co. Ltd., with plans for a pair of plants near Rocky Mount, N.C.

In the past year, there have been three greenfield plant openings of note:

•  BRISA Bridgestone Sabanci Lastik Sanayi ve Ticaret A.S — Aksara Province, Turkey, 13,000 passenger/light tires a day.
•  Federal Corp. — a car and light truck tire plant in Taoyuan, Taiwan, its second factory there and third overall. Capacity is rated at 6 million tires a year at full capacity.
•  Global Rubber Industries — Badalgama, Sri Lanka, 25 metric tons per day of OTR and farm tires.
•  Two other car and light truck tire plants — Group Michelin's in Leon, Mexico, and Nexen Tire Corp.'s in Zatec, Czech Republic, are due on stream before year-end. The plants are rated at 5 million and 6 million tires a year, respectively.

In addition, Sumitomo Rubber South Africa inaugurated truck/bus tire capacity (7,500 units/day) at its existing factory in Ladysmith.

More than a third of the specific investment projects tracked by Tire Business ($2.9 billion) is earmarked for Asia, with nearly a quarter ($1.8 billion) attached to projects in Europe and the Middle East. 

North America gets just under 10 percent this year.

For fiscal 2017, the 21 leading tire makers that Tire Business tracked for this report devoted $12.6 billion toward capital expenditures, which was 7.1 percent of combined revenues, up slightly on the 6.9 percent recorded in fiscal 2016.

Individually, BRISA Bridgestone and Cheng Shin Rubber Industrial/Maxxis International stood out among the others, devoting 24.6 and 16.8 percent of revenue, respectively, on capital improvements in fiscal 2017. Both companies were in the midst of building new factories, which skewed their data upward.

Continental A.G., Bridgestone Corp. and Group Michelin spent the most in raw monetary value, at $3.2 billion, $2.1 billion and $1.9 billion, respectively.

When it comes to research and development spending, 15 of the 20 that reported their R&D expenditures had higher spending in 2017 vs. 2016. The industry average for fiscal 2017 stood at 3.9 percent of sales, up 0.4 points from fiscal 2016.

The averages vary from 0.2 percent for Ceat Tyres Ltd. to 7.1 percent for Continental A.G., although Conti's average is skewed due to its sprawling automotive supply divisions. Conti's tire business-related R&D spending was 2.6 percent of sales.

It should be noted that Yokohama Rubber Co. Ltd. recently terminated its technology tie-ups with South Korea's Kumho Tire Co. Inc., in place since early 2014.

Yokohama cited the recent change in Kumho Tire's shareholding structure. China's Qingdao Doublestar Group acquired a 45-percent ownership stake in Kumho Tire in July in a $600 million-plus deal with Kumho shareholder Korea Development Bank.

Individual expansion projects, by company alphabetically, include:

ALLIANCE TIRE

• Yokohoma Rubber Co. Ltd.'s Alliance Tire unit is considering building a fourth factory to meet rising demand for its products, but management declined to comment on the size of the investment because the firm is still evaluating its product needs and investigating various sites.
•  APOLLO TYRESApollo Tyres laid the ceremonial foundation stone in January for a $280 million passenger tire plant in India's Andhra Pradesh state that the company expects to be on stream by mid-2020 with an annual capacity of 5.5 million tires.
•  ARYA HAMOON TIREChina's Shandong Linglong Tire Co. Ltd. has agreed to become the engineering/procurement/construction (EPC) and non-EPC contractor for the construction of a greenfield tire plant in southeastern Iran. Size and investment details have not yet been disclosed.
•  BAREZ GROUPIran's Barez Tires started production at a passenger/light truck tire plant in Koredestan, in western Iran. The $212 million plant is considered an extension of Barez's production unit in Kerman, Iran, and indeed has been curing up to 3,000 green tires a day from Barez's factory in Kerman for the past few years.

The plant's rated annual capacity of 44,000 metric tons — equal to 6 million units — and is part of Barez's bid to increase its overall production capacity to 140,000 tons, double that of just six years ago.

BRIDGESTONE

Bridgestone has disclosed nearly $350 million in expansion projects, including:$12 million to increase off-the-road tire production at its plant in Bloomington, Ill., adding multiple sizes and patterns for 29-, 33- and 35-inch OTR tires. 

Bridgestone said it would increase the workforce there by 30 to accommodate the expansion.$28 million in its Puente San Miguel, Spain, factory to support the launch of a line of 24-inch radial truck tires suited for on- and off-road applications. 

Truck tire production capacity is expected to reach 500 tires per day at the 53-year-old Puente San Miguel farm and OTR tire plant. The spending is in addition to $40 million in investments earmarked for the plant under Bridgestone's 2018-21 strategic plan.

Nearly $190 million to expand and upgrade its Poznan, Poland, passenger tire plant, boosting capacity to 40,000 units a year from 31,000 through 2022. The investment will involve expanding the physical site and encompasses "process automation, capacity increase, further improvement of process accuracy and ergonomic of work improvement."

Roughly $83 million for a plant in Burgos, Spain, to expand production capacity, purchase cutting-edge equipment and optimize existing production lines The plant in Burgos is rated at 27,300 car and light truck tires a day.$40+ million at a truck tire plant in Stargard, Poland, for similar reasons as above. Existing capacity is 3,864 units/day.

Bridgestone said it does not expect the projects to affect employment at any of the plants.

CEAT

CEAT has signed a memorandum of understanding with the government of India's Tamil Nadu state covering CEAT's intention to build a car and light truck tire plant near the town of Sriperumbudur. The projected investment is $620 million.

CHENG SHIN RUBBER

Cheng Shin Rubber/Maxxis International is planning to boost capital investment at its Maxxis Rubber India Pvt. Ltd. and P.T. Maxxis International Indonesia subsidiaries:$15 million to improve operations at its Maxxis Rubber India Pvt. Ltd. motorcycle tire plant in Gujarat Province that came on stream in mid-2017 with a daily capacity of 20,000 tires; and$30 million to improve operations at its P.T. Maxxis International motorcycle and passenger tire plant in Deltamas, Indonesia, that also came on stream in 2017.

CONTINENTAL

Continental is adding capacity for precured tread rubber at its tire plant in Mount Vernon, Ill., allowing it to cut delivery times to its ContiLifeCycle retread customers in the U.S. Conti did not disclose the scale of the capacity being installed nor its investment in the production line, which is expected to reach commercial-scale operation by the end of the first quarter.

P.T. GAJAH TUNGGAL

Indonesia's P.T. Gajah Tunggal and Japan's Inoue Rubber Co. Ltd. have broken ground on a motorcycle tire joint venture plant in Tangerang, Indonesia. The 50/50 joint venture, Gajah Tunggal IRC Manufacturing Indonesia, will produce IRC-brand high-performance motorcycle tires for the Indonesian OEM and replacement markets as well as exports, Gajah Tunggal said.

The plant is expected to be on stream by September 2019. The JV partners did not disclose the plant's size, capacity or expected employment. 

In a separate filing, Gajah Tunggal said it was selling 5.8 acres of land at its Tangerang manufacturing complex to the joint venture for $253 million.

GUIZHOU TYRE

China's Guizhou Tyre Co. Ltd. has expanded plans for its previously announced tire plant in Vietnam, increasing the budgeted investment 67 percent to nearly $400 million and adding heavy-duty and specialty tires to the plant's truck and bus tire capacities.

Guizhou, producer of the Advance and Samson brands, disclosed plans in April to build the plant in Vietnam's Long Giang Industrial Park, Tien Giang Province. 

According to a public filing, the plant's rated capacity is being expanded to 2 million units annually from 1.2 million. Guizhou has budgeted $245 million for Phase 1 of the project, $140 million for Phase 2 and $20 million for Phase 3.

HANKOOK

South Korea's Hankook Tire Co. Ltd. is moving ahead with plans to add truck tire capacity at its 11-year-old passenger tire factory in Rácalmás, Hungary, with production expected to come on stream in mid-2020. 

Hankook is budgeting $358 million for the expansion, which will result in 550,000 units of annual capacity for medium and heavy truck and bus tires. 

The expansions also will create about 150 jobs.

JIANGSU GST

Jiangsu General Science Technology Co. Ltd. (JGST) is increasing the investment budgeted for a truck and bus tire capacity expansion at its headquarters plant in Wuxi, China, by 20 percent to nearly $230 million. The project will add 1.2 million units of annual truck and bus tire capacity at its headquarters plant

The increased investment is expected to create 770 jobs and generate $310 million in sales when in full operation, the company said.

MAGNA TYRES

Waalwijk, Netherlands-based Magna Tyres Group initiated production in June 2018 of off-the-road (OTR) tires at its expanded and re-engineered OBO Tyres retread plant in Hardenberg, Netherlands, and is in the process of increasing curing capacity further to keep up with demand. Magna did not disclose the plant's capacity or the scale of investment it budgeted to add new tire capacity.

MICHELIN Group 

Michelin has struck a deal to buy Camso Group, the Magog, Quebec, Canada-based off-road tire and rubber track producer, and plans to combine the business with its own OTR tire activities into a new division to be based in Quebec.

Michelin has agreed to pay $1.45 billion for Camso, which the French company said represents an enterprise value of $1.7 billion, or a multiple of 8.3 times EBITDA after synergies. The transaction will not impact Michelin's financial position.NOKIANNokian Tyres P.L.C. is planning to boost capacity for heavy commercial tires at its headquarters plant in Nokia, Finland, by 50 percent with an $82 million investment over the coming three years.

The project will increase the plant's rated capacity for heavy tires to about 32,000 metric tons per year from 20,000, and will create up to 50 new jobs, Nokian said.

NTC/NATIONAL TIRE CO.

Saudi Arabian National Tire Co. (NTC) has struck a deal with South Korea's Samsung Engineering for the engineering, procurement and construction of its planned $1.6 billion tire plant in Saudi Arabia.

NTC plans to build the factory, which will be rated at 20 million units a year capacity, in Jubail, an industrial city in the eastern part of the kingdom on the Persian Gulf. It is expected to start production by year-end 2020, with staffing of about4,000 employees.

OTANI TIRE

Thailand's Otani Tire Co. Ltd. is ramping up capacity at a radial tire plant it brought on stream in 2017. The new plant, located a few miles from the firm's 32-year-old bias-ply factory in Thailand's Nakhonpathom District west of Bangkok, is rated at 2,500 units a day at full capacity.

The plant is operated by a separate company, Otani Radial Co. Ltd., in which Middle Eastern tire marketer Zafco International has a 40-percent ownership stake. As a result, much of Otani Radial Tire's output during the ramp-up phase is dedicated to the launch of Zafco's Armstrong brand.

The companies did not disclose the investment in the new plant.

QINGDAO DOUBLESTAR

Qingdao Doublestar Group is planning to relocate its Doublestar Dongfeng Tire subsidiary in Shiyan and upgrade it to a "smart" factory in a $220 million, 18-month project.

The new plant, with planned annual capacity of 1.5 million truck/bus and 5 million passenger tires, will be built on a 3.23-million-sq.-ft. site in the Zhangwan District Industrial Park in Shiyan, Hubei Province.

Qingdao Doublestar also has concluded its acquisition of a 45-percent ownership stake in South Korea's Kumho Tire Co. Inc., through a $607 million private placement with Korea Development Bank. 

By doing so, Doublestar becomes Kumho Tire's controlling shareholder, while KDB and other Kumho creditors remain the second largest shareholder with a 23-percent stake. The remaining 22 percent of Kumho Tire's shares are in other private hands.

PIRELLI

Pirelli is buying a 49-percent stake in Jining Shenzhou Tyre Co., the new name for Hixih Rubber Industry Group's tire manufacturing entity in Yanzhou, China. Pirelli will pay roughly $75 million for the stake in Jining Shenzhou Tyre with the right to increase the stake to 70 percent between Jan. 1, 2021, and year-end 2025.

Pirelli will take over management of the plant, set up in 2005 in the Yanzhou Hixih Industrial Park and provides technical assistance. The plant has rated annual capacities of 1.2 million radial truck tires, 10 million car tires and 3 million high-performance motorcycle tires, according to Hixih Group.

Pirelli has budgeted nearly $310 million in Latin America over the next three years, with a focus on digital transformation, smart manufacturing and "big data." Targets also include modernization of local production facilities and increasing the proportion of "high value" production — prestige, premium (rim diameters of 18 inches and above), specialty and "super specialty" tires — in the region to about 20 percent by 2020.

RIGID TYRE

Sri Lanka's Rigid Tyre, a unit of United Arab Emirates-based Onyx Group, has raised the scale of and investment budgeted for a pneumatic tire plant it is building in Horana, Sri Lanka.

SAILUN JINYU GROUP

China's Sailun Jinyu Group Co. Ltd. is planning to increase its investment in a truck and OTR tire plant under construction in Vietnam by more than $140 million, according to a company filing on the Shanghai Stock Exchange.

Sailun Jinyu disclosed plans to build the plant — rated at 1.2 million truck and bus tire and 30,000 OTR tires annually — in late 2015. The investment at that time was given as $200 million. Sailun Jinyu did not provide a status update on the plant, which the company said in 2015 would take three years to build and commission.

SHANDONG LINGLONG

Shandong Linglong Tire Co. Ltd., China's third largest tire maker with annual sales of more than $2 billion, has committed $1.7 billion in recent months to build a pair of plants, one in China and one in Serbia.

SUN TYRE

Sun Tyre & Wheel Systems of India has purchased a solid tire plant near Colombo, Sri Lanka, from Starco Group and has agreed to continue making tires for the Kenda Rubber Industrial Co. Ltd. subsidiary.

The plant in Sri Lanka — which Starco opened in 2014 — will be Sun Tyre's third on the island nation and fifth overall and will boost its capacity by 40 percent.

TOYO TIRE

Toyo Tire & Rubber Co. Ltd. is budgeting $125 million and $187.5 million, respectively, for expansions of plants in the U.S. and Malaysia, which will add capacities for 2.4 million passenger tires a year at the company's White, Ga., plant and 4.8 million a year at the Toyo Tyre Malaysia Sdn Bhd. plant in Perak, Malaysia.

The existing Malaysian plant has a production capacity of 5 million units per year and has sufficient land on site to construct another building of the same size next to it, Toyo said.

TRIANGLE GROUP

China's Triangle Group Co. Ltd. plans to build its first two North American tire plants on a 1,449-acre tract of land near Rocky Mount, N.C. The tire maker said Phase 1 of the nearly $580-million investment — bolstered by $152 million in state and local incentives — will begin later this year with a groundbreaking on a passenger and light truck plant that will have an expected capacity of 5 million tires per year.

The second facility, which will sit alongside the passenger tire plant, is expected to produce 1 million truck/bus tires per year. Weihai, China-based Triangle, which operates five tire plants in China, expects both phases to be completed by 2023, employing up to 800 when fully operational.

YOKOHAMA

Yokohama Rubber Co. Ltd. has budgeted more than $100 million in the past year for specific projects, including:$60 million to double annual capacity for passenger tires at its Yokohama India Pvt. Ltd. subsidiary over the coming 18 months. 

The project, which will double the Haryana, India, plant's annual capacity to 1.53 million tires, is designed to help the company "avoid capacity shortfalls" in light of India's strong sales growth projections.$45.5 million through year-end 2019 to expand capacity for OTR tires by nearly 61 percent at the Dahej, India, factory of its ATC Tires Pvt. Ltd. subsidiary. 

The project will raise annual capacity at the plant to 91,700 metric tons. The new investment is part of a Yokohama strategy to expand its commercial tire business.