Jiangsu General Science to invest $300 Million in Thailand

Jiangsu General Science Technology Co. Ltd. has decided to ditch Cambodia for Thailand as the location for a planned $300 million tire production plant — a move to tap local demand and cheaper costs in the world’s largest rubber producer.

The Chinese tiremaker also said it is investing $80 million to set up a Thai subsidiary as part of a broader plan to build its first overseas facility.

The Wuxi, Jiangsu province-based firm said in a filing (link in Chinese) to the Shanghai Stock Exchange on September 18 that the facility in Rayong province, an industrial park about two hours by car from the Thai capital of Bangkok, will be able to save on costs, including import taxes and transport costs for natural rubber.

The company said in April it planned to spend the same amount to set up a plant in Cambodia’s Sihanoukville Special Economic Zone, which would have been constructed by Chinese and Cambodian enterprises and would have been a landmark project on China’s Belt and Road Initiative.

The filing didn’t say when construction of the Thailand plant will begin but said it aims to complete construction within 15 months, instead of the 18 months planned for the Cambodia facility.

Jiangsu General said the relocation to Thailand will enable it tap local government incentives such as an exemption from corporate taxes for the first eight years, and to take advantage of the nation’s better-developed tire production ecosystem as Thailand is Southeast Asia’s top car producer.

Thailand is the world’s 12th-largest automobile production center, producing nearly 2 million units last year. It’s expected to rise to the world’s eighth-largest in 2020 with an output of 3 million.

The Jiangsu General factory is expected to have an annual output of 1 million all-steel radial tires and 6 million half-steel radial tires. When operational, it will contribute nearly 2.2 billion yuan ($320 million) in revenue and 250 million yuan in net income a year. A full return of investment will take around seven years, according to the filing.

Other tire companies that have set up plants in Thailand include France’s Compagnie Générale des Etablissements Michelin, Goodyear Tire & Rubber Co. from the U.S., as well as China’s Shandong Linglong Tire Co. Ltd. and Double Coin Tyre Group Ltd.