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Kumho Tires revealed on Tuesday, March 23, that it has decided to put its rubber processing plant in Vietnam up for sale. The Korean tire manufacturer stated it made the decision to be able to focus on the company’s main business.
Why Kumho is ditching its Vietnamese factory
As per Yonhap News Agency, the country’s tire maker recently signed a joint venture deal with Hyundai Motor and Vietnam’s Thanh Cong Group. The contract includes the agreement to sell Kumho Tires’ rubber plant, and this deal is expected to be completed in May.
In any case, the Korean tire manufacturer is also giving up its plant in Vietnam as it was also hit with losses due to the effects of COVID-19 on the business. When the factory was first opened almost 14 years ago, it was designated to produce six million tires per year, however, when the pandemic struck, Kumho Tires started to struggle with its declining sales.
At this point, the firm’s situation is getting worse since it is not making the expected profit because of the increase in raw material prices. Thus, the company seems to be left with no choice but to just let go of the factory in Vietnam. Besides, it has a new deal that the company hopes will push Kumho for recovery.
The building of the Vietnam plant
Kumho Tires was given the go signal to construct its plant in Vietnam in 2006. The regional government authorities in Binh Duong Province, Vietnam, approved the South Korean company’s bid to put up its $380 million tire plant in the territory.
At that time, the general director of Kumho Tires Vietnam, Jongsun Sun, said that it would be investing $155 million for the first phase of the project, and the construction started a few weeks after that. The plant finally started to produce tires in 2008 and churned out 3.15 million units in one year.
The rubber tires made at the Vietnam factory were supplied to retailers in the country, while the rest were exported to Europe, the U.S., and Southeast Asian countries. This was Kumho Tires' biggest foreign investment and already operating three tire factories in China and South Korea. And unfortunately, this year, the company is letting go of this same plant it built more than a decade ago.
