Kenda Rubber invests $40 million to beef up SE. Asian tire production

01, Apr. 2020

Photo by Robert Laursoo on Unsplash
Photo by Robert Laursoo on Unsplash

TAIPEI, NNA - Taiwan’s major tire manufacturer Kenda Rubber Industrial Co. has pumped $33 million and $8 million into its Vietnam and Indonesia factories respectively to ramp up production, as it slashed operating costs and output in China.

Rising operation costs as well as government industrial policies such as moving traditional productions inland have driven Kenda to abandon production at its Shenzhen plant in the southern coastal province of Guangdong, Kenda spokesman Chun Liu told NNA Tuesday.

Kenda had relocated Shenzhen’s industrial vehicle tire manufacturing equipment to its two Vietnam plants, while the Shenzhen production of bicycle and motorcycle tires was moved to another China factory located in Tianjin city in the north. Some equipment in Shenzhen were transferred to its Indonesia plant.

To mitigate investment risks as manufacturing costs kept escalating in China, the company decided to increase production at its Southeast Asian plants, Liu said.

But it is just a temporary halt in its China expansion. Kenda will "resume once we find proper destinations for production because China is a huge market after all,” said Liu. It also has a plant in Kunshan and two in Tianjin.

With the investment for its Indonesian plant expansion, Kenda expects to roll out 5,000 more bicycle tires to reach a daily output of 20,000 units.

Over in Vietnam, one of its plants will boost daily production from 7,000 automobile and industrial vehicles tires to 15,000 by year-end, according to a report by Commercial Times in Taiwan.

Kenda’s Southeast Asian sales, which contributed 16.8 percent to its global sales last year, are expected to grow to 23 percent this year, according to the report. Its three China production bases contributed about 52 percent to the company’s annual sales, according to Liu.

Overall sales for the first two months of this year fell. January suffered a 12.5 percent fall to 1.69 billion New Taiwan dollars ($55.7 million) while February saw a sharp 19 percent decline to NT$2.33 billion, down from the same periods last year, according to its financial statement.

Meanwhile, the tire maker has launched a real estate development project at the site of its 160,000-square-meter plant in Shenzhen to transform it into offices and residences. Construction for this joint venture with Hong Kong-listed Kaisa Group Holdings Ltd. will begin in June, said Liu.

Kenda manufactures tires for bicycles, motorcycles, automobiles as well as agricultural and industrial vehicles in Taiwan, China, Vietnam and Indonesia. It also has operations the United States and Germany.