Tire Maker Cheng Shin to Build Plant in Indonesia

Taiwan’s Cheng Shin Rubber Industry, the world’s ninth-largest tire producer, has quadrupled investment in Indonesia as it seeks a production base for supplying rapidly growing demand in Southeast Asia. Cheng Shin Rubber Industry Co has announced plans to expand its presence in the ASEAN region with a new US$80 million factory in Indonesia. This will be the company’s third operation in South East Asia (after Thailand and Vietnam). The new investment plan comes at a time when more Taiwanese manufacturers are fine-tuning their foreign investment strategy, as production costs rise in China.

Richard Lo, Cheng Shin financial director, said the company will use bank loans to finance three quarters of the investment, while the rest would come from its own cash. Lo said the new plant will make tires for cars and motorcycles for Southeast Asia as the company moves away from China investments in line with rising wages and costs in that country.

Cheng Shin will face tight competition from established tire producers as well as new competitors. South Korean tire maker Hankook Tire, the seventh-largest such firm, opened a $350 million plant in Cikarang, West Java, in September. Hankook is seeking by 2018 to invest up to $1.1 billion in the plant, which will act as an export base for the North America and the Middle East, as well as a regional hub for emerging Asian markets.

Indonesia is the largest of the fast-growing ASEAN countries has a promising outlook, with its economy forecast to expand by up to 5.9% this year and up to 6.2% next year, according to the Bank Indonesia. Cheng Shin is expected to begin building the plant by the end of next year on a 27-hectare plot outside Jakarta. Production will initially focus on motorcycle tyres, then gradually shift to tyres for passenger vehicles.