Car Tires Also Hit by 'COVID-19 Shock'

Domestic Top 3 Tire Companies Face Inevitable Impact on Q1 Earnings

Finished vehicles waiting in the storage yard of Hyundai Motor's Ulsan plant (Photo by Yonhap News)

[Asia Economy Reporter Kim Ji-hee] The wave of the novel coronavirus infection (COVID-19) is sweeping beyond the finished car industry to the tire industry. As finished car factories around the world are shutting down one after another, domestic tire factories have also been unable to avoid shutdowns. The aftermath of these shutdowns is expected to lead to a deterioration in first-quarter earnings.

According to the financial investment industry on the 25th, Hankook Tire & Technology's operating profit for the first quarter of this year is expected to be around 99.3 billion KRW, a 29.4% decrease compared to the same period last year. If this forecast holds true, Hankook Tire, which has maintained operating profits in the trillions of KRW on a quarterly basis, will fall below the 100 billion KRW mark for the first time. Sales during this period are also expected to record around 1.5 trillion KRW, down more than 8% compared to the same period last year.

It is analyzed that the COVID-19 outbreak will impact the tire industry's performance. As global finished car factories have entered shutdowns due to the spread of COVID-19, the tire industry has also taken a direct hit. Not only have sales been immediately affected, but factories have also stopped operations one after another.

In South Korea alone, Hankook Tire's Daejeon and Geumsan factories halted operations from the 14th to the 16th, and Kumho Tire, which operates three domestic factories in Gwangju, Gokseong, and Pyeongtaek, additionally suspended operations from the 23rd to the 25th following a shutdown from the 12th to the 15th. Nexen Tire also decided to stop operations at its Yangsan factory in Gyeongnam for 12 days from the 18th to the 29th.

Accordingly, the performance of Kumho Tire and Nexen Tire is also unstable. Kumho Tire is expected to record an operating profit of around 3 billion KRW in the first quarter of this year, while Nexen Tire is forecasted to decrease by 34% to about 32 billion KRW. As time passes, the securities industry's outlook is becoming increasingly pessimistic.

An industry official said, "The tire industry's business conditions inevitably depend on demand in the automobile market, and the export ratio among automobile parts is also relatively high," adding, "It will not be easy to escape poor performance in the second quarter, when the impact of COVID-19 in major export countries has intensified."

This content was produced with the assistance of AI translation services.