Understand the uniqueness of Hankook Tire

Although some tire companies have recently stated that building factories in Southeast Asia can even offset the impact of anti-dumping and countervailing duties on profits because of the outstanding cost advantages.

But soon some tire companies gave objections. Under Trump's tariff policy, Asia's cost advantages will be difficult to highlight. On the contrary, building factories in the United States will bring more North American sales benefits to companies. And Hankook Tire is a firm believer in this view.

According to Hankook Tire's latest tire production capacity layout, by 2026, Hankook's production in the United States will double, reaching three times the average production of American tire factories.

Hankook Tire's second US factory is about to start production
In January 2025, Hankook Tire began installing steel frames for its second factory in Clarksville, Tennessee, USA. The scale and appearance of this factory are no different from its first US factory opened in 2017.

It is reported that the investment in this factory is as high as US$1.6 billion (about RMB 11.7 billion) and is about 70 kilometers northwest of Nashville, the capital of Tennessee.

In the past five years, Hankook Tire has expanded its brand power by sponsoring various events, which will help Hankook further expand its supporting share in the North American market. It is reported that the tires produced by Hankook's second factory will be delivered to nine automakers, including Hyundai Motor Company, Kia Motors and Toyota Motors, which have factories in Alabama, Georgia and Kentucky respectively. Tennessee borders these three states, so it has a strong transportation advantage.

According to Hankook's previous layout, starting in 2026, Hankook's Clarksville plant will produce 35 different sizes of products. Hankook's first North American plant has 20 production lines with different sizes and specifications, which can be customized for six automakers. Hankook said that it will continue to expand its supporting market share, and the number of models equipped with Hankook tires will reach about 250 in 2026, which is twice the current number.

It is reported that Hankook believes that it can achieve its goal because the plant is very efficient. Clarksville, Tennessee, which is being established, also has a big advantage-smart manufacturing. The plant will use the same AI-driven robotic arms and automated guided vehicles as Hankook's first U.S. plant.

If the plant goes into production smoothly, Hankook can use the production capacity of the two plants to expand its local supply capacity to the North American market from the previous 5.5 million sets to 12 million sets - more than doubling.

Hankook Tire considers this expansion to be a "timely rain". At the end of 2024, Donald Trump "broke the news" on social media - a 25% tariff will be imposed on products shipped to the United States from Mexico and Canada. The tariff may be implemented after Trump takes office on January 20. This also means that the manufacturing cost that is lower than that of the United States will be "disappeared" under the increase in tariffs!

Mexican tire factories increase investment by 7.3 billion a year
As of the end of 2024, 9 global tire companies have built and operated 14 tire factories in Mexico. The geographical advantages of North American transportation here attract global leading tire companies to lay out production capacity.

In 2024 alone, Yokohama, Sailun Tire and Zhongce Rubber will build factories here, with an investment of nearly US$1 billion (RMB 7.3 billion).

It is expected that if the factories of the three companies are put into production in the next two years, Mexico's passenger car tire production capacity will increase by at least 10 million tires a year; some factories have an annual production capacity of 6 million tires. Such a single unit capacity is almost twice the average capacity of American factories.

According to data from the American Tire Manufacturers Association, the annual production capacity of 57 tire factories in operation in the United States (many of which have been in operation for more than 20 years) averages 3 million tires per year. The output of Hankook Tire's two factories can match the supply capacity of four traditional tire factories in the United States, so it has a certain production capacity advantage in the United States.

Investing in American tire production capacity is still risky
From the current speculation, building a factory in the United States seems to be very cost-effective. However, some industry insiders remind that aggressive investment in the United States is still risky. Due to the general tariffs on imported goods, this may lead to an increase in the price of raw materials such as natural rubber shipped to the United States. In addition, rising prices may lead to a longer tire replacement cycle.