The increasing number of audio and video products flooding the Chinese market are just the tip of the iceberg. South Korean manufacturers have captured the imagination of Chinese consumers with a wide range of colourful clothing and accessories, home appliances, and consumer electronics. The Korean wave has hit China with full force, and young women, housewives, and business executives across the nation have welcomed the deluge of stylish, quality products with open arms.

One could argue that South Korea's top internationally known brands could be counted on one hand, but this kind of oversimplified thinking clearly doesn't do justice to the clout packed by China's tiny peninsular neighbour. Household names such as Samsung and LG are renowned for their quality electronics, and Daewoo and Kia for their cars. Yet a number of somewhat less famous but undeniably powerful players have also made their mark on the global market, including logistics firm Hanjin and casual sportswear manufacturer Rapido. One glaring omission from this list would be Kumho, however.

One of the world's top 10 tyre brands, Kumho has been quietly but steadily developing its China operations for the past 10 years. And this is just the beginning.

"By 2008, Kumho wants to capture at least 20 per cent of China's retail and OEM (original equipment manufacturer) tyre market respectively. We want to become the top tyre producer by production capacity in China," says Kim Chang Nyun, general manager of Kumho (China) Sales Co, Ltd. The company's global targets are equally ambitious: It plans to emerge as one of the world's top five tyre brands by 2010.

Its sales revenues hit 2.2 billion yuan (US$273 million) in China in 2005, with a sales volume of more than 12 million. The manufacturer held more than 15 per cent of China's sedan tyre market last year.

"We expect 2.8 billion yuan (US$347 million) in sales revenues and more than 15 million in sales volume in China this year," says Kim, adding that this will be a significant year for Kumho.

"This year we will finish construction of our factory in Tianjin and go into production. Our factory in Changchun (in Northeast China's Jilin Province) will kick things off as well, and by the latter half of this year, our global R&D (research and development) centre in Tianjin will also start operations," Kim tells China Business Weekly.

"Kumho will also set up a headquarters in Shanghai to develop overall sales and production plans and strategies for the Chinese market."

Significant investments last year also illustrated Kumho's recognition of the importance of the Chinese market.

"We have always had unswerving confidence in the Chinese market, and regard it as the top potential markets in the world," Kim says.

The past year has been busy for Kumho. In August, it announced the launch of its global R&D centre in Tianjin. The facility was built with an initial investment of US$30 million, and will start its first assignment later this year.

In September, Kumho reached an agreement with Changchun FAW to start a joint venture, valued at more than US$100 million, in the Changchun Hi-tech Industrial Zone.

It inaugurated its Tianjin factory in December, with a launch investment of US$178 million. If this first phase goes smoothly, Kumho will contribute an additional US$130 million.

Once the Tianjin and Changchun factories begin manufacturing tyres in 2007, Kumho's 13-million capacity operations in Nanjing, in East China's Jiangsu Province, should bring its annual production capacity to 25 million.

"By that point, Kumho will be the biggest sedan radial tyre production base in China, by production capacity and market share," Kim says.

Intense competition

China's auto industry truly started taking off in 2002, but competition in the tyre market is even more intense. The world's top 10 manufacturers have all established operations in China.

"The competition here in China is much hotter than any other region in the world. All of the global brands are here," says Kim.

"But Kumho and just one other manufacturer dominate the South Korean tyre market. To draw an analogy, if the competition there was the National Games, then China would be the Olympics."

Kumho first came to China in 1995. It strategically positioned two factories a northern facility in Tianjin and a southern one in Nanjing.

After the Asian financial crisis in 1999, Kumho was forced to sell its Tianjin factory to Japanese tyre giant Bridgestone to repay its debts. This had a significant impact on its overall production capacity and sales distribution.

After years of development in Nanjing, Kumho eventually grabbed more than 25 per cent of the market in the regions south of the Yangtze River. Since 2003, it has streamlined its operations and strengthened its resolve. A number of plans are now in the cards, and Kumho's Changchun production base will provide an opportunity to expand its OEM business with Changchun FAW.

The company has five logistics centres in Nanjing, Beijing, Guangzhou, Shanghai and Chengdu, the capital of Southwest China's Sichuan Province. Ten branches have also been established in ten different cities, including Kunming in Southwest China's Yunnan Province, Qingdao in East China's Shandong Province, and Xi'an, in Northwest China's Shaanxi Province.

More than 5000 dealers across China comprise Kumho's huge distribution network.

"We have also decided to shift our investment focus in China from wariness to positive expansion," says Kim.

With the investment in the production bases, Kumho does not need to worry about capacity in the future.

"We then plan to shift our focus from production to production and service," he says.

Kumho has established more than 100 Automaster Kumho Service Centres and more than 1000 Kumho tyre stores in China. The company has also come up with a multi-brand strategy to meet complicated market demands.

"We divided our brands and products into three categories: ECSTA for the high-end market, PRIMA for the secondary market, and Kumho for the low end," Kim says.

"And with the launch of our global R&D centre in Tianjin, Kumho will get a better handle on the Chinese market and design tyres suited to Chinese consumers. We offer the best products and services in China."

(China Daily 02/27/2006 page7)