Kenda aims to gain traction in U.S. market

As Kenda Rubber Industrial Co. Ltd. approaches a 1-percent consumer tire market share in the U.S., the Taiwanese tire maker is launching a dealer rewards program and making investments in capacity expansions to help keep the brand growing.

Kenda Tire U.S.A. Inc. launched the rewards program, called Kenda Traction, Jan. 1. Traction will be administered by Kenda's wholesale distributors and will pay monetary rewards to retailers starting at annual purchase volumes of as few as 500 tires a year, company officials said.

In addition, Kenda Rubber plans to broaden its passenger/light truck product portfolio—including the first tires designed by a new U.S. research and development team—and invest heavily in expanding capacity at its plants in Taiwan and China, Jimmy Yang, Kenda Rubber president and vice chairman, told a gathering of about 70 U.S. distributors in Las Vegas recently.

After starting at essentially zero in sales in 2009, Kenda Tire USA has built its business steadily to more than $70 million last year, according to Bob Phoenix, vice president of sales for Reynoldsburg, Ohio-based Kenda Tire.

Prior to 2009, Cooper Tire & Rubber Co. handled distribution of Kenda-brand car and light truck tires in the U.S.

Increasing market share

Kenda expects to hit or exceed a 1-percent share of the U.S. consumer market this year, Yang said, and could double that by 2018, based on the programs being introduced and an enlarged product portfolio.

Much of what Kenda is doing is aimed at establishing the Kenda brand as “not just another brand from Asia,” Yang said, explaining Kenda is an anglicized version of the Chinese phrase for “keep growing.”

“Not that long ago,” he said, “Kenda often was compared with any of a number of "no-name' tires from China. Our job now is to establish Kenda as a "legitimate' brand coming to the market with substantial value.”

To illustrate the company's efforts to build brand equity, Yang held up a T-shirt with a “HELLO. My Name is Kenda Tires” name tag on it—a gift from long-time distributor Fairmount Tire and Rubber.

Kenda's long-term goal is to hit a 5-percent share, or 10 million tires, Yang said.

“With your help, your commitment,” he told the assembled distributors, “sooner, rather than later, we'll achieve that dream.”

Besides strong marketing efforts, Yang noted that Kenda has committed to beefing up its research and development efforts—including the establishment of a U.S. R&D center in Akron—and expanding its manufacturing capabilities.

The stepped-up R&D should lead directly to OE fitments with global car manufacturers, he added, “like Honda or Toyota, like Lexus, BMW or Mercedes ... but not Ferrari.”

$400 million investment

To ensure that the company has sufficient tires to meet its ambitious expansion targets, Kenda is committing more than $400 million over the next several years to enlarge its capacity, Yang said, including a radial truck tire plant in Kunshan, China; relocating and expanding a car and light truck tire factory in Shenzhen to nearby Huizhou; and building a plant in Jakarta, Indonesia, for two-wheel tires and tubes.

The latter of these plants is scheduled to start production in 2016, he said, but it could become an important cog in Kenda's supply lines to U.S. dealers should the U.S. impose tariffs and/or countervailing duties on Kenda's plants in China. Passenger tire capacity could be added there to complement Kenda's Taiwan capacity, he noted.

Kenda's first option in case the U.S. imposes onerous duties would be to use Kenda's plants in Taiwan, where it has daily capacity for 8,000 units of passenger tires. This contrasts, though, with Kenda's Chinese plants, which combined represent 125,000 units of daily capacity.

Late last year, the company introduced the Klever S/T KR52 for the SUV/CUV market, initially in six sizes and eventually in 26. The KR52 replaces the KR50.

Kenda also told its dealers it intends to roll out two tires in late 2015 (delivery in early 2016), an all-season ultra-high-performance tire and an H/T light truck tire for commercial delivery applications. Both will be the result of the new U.S. R&D/design center.

Kenda, considered the No. 28 tire maker worldwide, expects to report $1.2 billion in sales this year and hit $2 billion by 2019-20, he said.

As for Kenda Traction, information released at the meeting with distributors showed dealers can earn rewards of 75 cents a tire along with co-op credit of 25 cents for buying 500 tires in a year. The rewards rise to $1.25 a tire for buying 1,000 units and $1.75 for 1,600 units.