The strong demand for farm- and industrial-vehicle tires in North America in 2002 has been a boon for Taiwan rubber-tire makers, whose exports to the market have soared by an average of 50%.

At least three publicly listed tire manufacturers in Taiwan have mapped out their different strategies for tapping the North American market. These companies are Kenda Rubber Ind. Co., Hwa Fong Rubber Ind. Co., and Cheng Shin Rubber Ind. Co.

Kenda recently reported that its tire exports to North America have increased robustly in 2002. In the farm/industrial-vehicle tire class, the company has posted about 100% comparative sales growth. Kenda plans to expand its capacity for such tire products to meet the strong demand from both the North American and mainland Chinese markets.

Kenda currently produces most of its farm/industrial-vehicle tires in mainland China. It has a plant in Shenzhen with a daily capacity of about 15,000 tires, and a factory in Kunshan capable of turning out about 3,200 tires per day. Kenda says it will integrate the production of tires for farm/industrial vehicles, motorcycles/scooters, and bicycles in Shenzhen, while making radial tires for trucks, buses, and passenger cars in Kunshan.



Kenda's board of directors recently approved a plan to open a new US$30 million plant next to the company's existing facility in Shenzhen. The new factory is scheduled to be completed by the end of 2003, with an initial daily capacity of over 3,000 tires.

Hwa Fong, which derives over 40% of its revenue from farm/industrial-vehicle tires, has also enjoyed strong sales in 2002, due mainly to the booming demand for farm/industrial-vehicle tires in North America. The firm has reported that its full-year 2002 revenue from farm/industrial-vehicle tires is expected to rise 50% over 2001, prompting the company to expand its capacity in this product category.

Hwa Fong currently produces farm/industrial-vehicle tires at plants in Taiwan (with a daily capacity of over 8,000 tires) and Changshu, Jiangsu Province, mainland China (about 2,000 tires). As the costs for capacity expansion in Taiwan would be much higher than in mainland China, Hwa Fong has decided to pour at least US$3 million to expand the capacity at its Changshu facility. The expansion is scheduled to be completed by the end of the second quarter of 2003, doubling the capacity at the Changshu facility to over 4,000 tires per day.

Hwa Fong also plans to increase the production ratio of farm/industrial-vehicle tires at its Thailand plant to meet the demand from the U.S. and Southeast Asia. The Thailand plant currently turns out about 16,000 farm/industrial-vehicle tires per day, and the volume is expected to rise to over 20,000 tires soon.


Putting It All Together


Since farm/industrial-vehicle tires are generally sold attached to wheel hubs in North America, all of the top-three tire makers in Taiwan are actively developing hub-production operations in the U.S. to strengthen their competitiveness and control costs.

Kenda has acquired four wheel plants in the United States through one of its major shareholders. Hwa Fong set up a wholly owned wheel-hub plant in Atlanta, Georgia last year. Cheng Shin recently completed an expansion of its Atlanta warehouse and is planning to set up a wheel-hub plant nearby in the near future.

Industry sources explain that as most farm/industrial-vehicle makers in the U.S. are used to buying assembled tire/hub sets, Taiwan tire suppliers have often sold their farm/industrial-vehicle tires to wheel makers there rather than to vehicle makers directly. In the past few years, however, many local tire makers in addition to Kenda, Hwa Fong, and Cheng Shin have also built or acquired wheel plants in the U.S. to boost margins.

Kenda says that with the help of its wheel-production capacity in the U.S., exports of its farm/industrial-vehicle tires to the U.S. will double year-on-year for the full-year 2002.

Hwa Fong has seen steady growth in its farm/industrial-vehicle tire business, especially in North America where it has two tire warehouses, including one in Ohio and another in Atlanta. The enterprise's wheel plant in Atlanta began mass production in April 2001, helping the company sharply increase its tire sales to the U.S.

Cheng Shin, the largest tire maker in Taiwan, is also actively developing its farm/industrial-vehicle tire business in North America, which is the Taiwan company's largest export market. It currently operates four warehouses in the U.S. and Canada, and has been enjoying strong sales in the huge combined market. In mid-2002, the company expanded the inventory capacity of its Atlanta warehouse to about 210,000 tires (from a floor area of 80,000 square meters to 180,000 square meters); it also plans to set up a second wheel plant in the U.S. to expand sales there.