'Tire Industry Takes the First Hit from "Anti-Dumping"... IRA Brings Mixed Fortunes'

Increasing Local Factory Production
Tensions Over Possible Expansion of US Product Range

[Asia Economy Reporter Seong Giho] As the US Inflation Reduction Act (IRA) has dealt a blow to the complete vehicle industry, there are prospects that the impact could extend to auto parts suppliers. In particular, the three major tire companies have experience in preparing countermeasures against last year’s US anti-dumping measures, so their fortunes may diverge depending on the outcome.

According to the tire industry on the 1st, in the second quarter of this year, the North American sales of the three domestic tire companies accounted for about 28-36% of each company’s total sales. Hankook Tire recorded sales of 568.7 billion KRW, the highest sales amount. Kumho Tire accounted for 36% of total sales with 321.9 billion KRW, the largest share. Nexen Tire recorded 204.5 billion KRW.

The tire industry has been focusing on expanding factories in North America. Hankook Tire held a board meeting on the 29th of last month and approved the expansion of its Tennessee plant in the US. The Tennessee plant was completed in 2017, and the first phase of construction is currently finished. It can produce 5.5 million passenger car and light truck tires annually, and with this expansion, it is estimated to produce an additional 1 million truck and bus tires per year.

Kumho Tire also began expanding its Georgia plant in the US last year. Once the expansion is completed, the Georgia plant’s production capacity will increase from 4 million to 4.5 million units annually.

The reason the two companies are interested in North American plants is that they were the first to be hit by the US anti-dumping measures on Korean tires last year. The US Department of Commerce set anti-dumping rates at 27.05% for Hankook Tire, 21.74% for Kumho Tire, and 14.72% for Nexen Tire last year. Because of this, tire companies have been focusing on expanding local factories to avoid anti-dumping sanctions.

However, Nexen Tire does not have a local plant, raising concerns about potential damage from the Inflation Reduction Act in the future. Nexen Tire currently operates a sales corporation and a research and development (R&D) center in Ohio, USA. All products sold in the US are supplied from two domestic factories located in Yangsan and Changnyeong.

The tire industry is currently not directly affected by the Inflation Reduction Act. However, there is a tense atmosphere as it is expected that the scope of locally produced parts could be expanded after the US midterm elections in November.

There is also a prospect that this Inflation Reduction Act, which focuses on electric vehicles, could help improve the tire industry’s structure. Electric vehicle-specific tires are about 20-30% more expensive than regular tires. Additionally, electric vehicles are heavier and have higher instantaneous acceleration compared to internal combustion engine vehicles, which means replacement cycles are relatively shorter, a positive factor.

An industry official said, "Currently, sanctions related to complete electric vehicles and batteries are ongoing, so there is no significant damage yet," but added, "Since the US can expand the scope of locally produced items at any time, we are discussing countermeasures related to this."

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