Hankook Tire to Invest $800 Million to Build First Plant in U.S.

Hankook Tire Co. (161390), South Korea’s biggest tiremaker, will invest $800 million to build its first factory in the U.S. as carmakers stay on track for a fifth straight year of growth.

The plant will be located in Tennessee and have an annual production capacity of 11 million tires, according to an e-mailed statement by the Seoul-based company. The factory will be Hankook’s eighth manufacturing base globally and is scheduled to begin production in 2016, the company said.

Hankook is expanding in the U.S. as the North American auto industry undergoes what Morgan Stanley estimates to be the fastest expansion since 1950. In the five years through 2015, automakers are adding 3.5 million vehicles worth of annual production capacity, according to the New York-based bank.

“The new plant signals that the company is planning to produce more premium tires and shows its confidence in its brand and products,” Shin Chung Kwan, an analyst at KB Investment & Securities Co. said by phone. “The additional capacity will help Hankook Tire produce more than 100 million units, and help secure and develop the company’s position in the U.S. market.”

Hankook, which supplies Hyundai Motor Co. (005380) and Kia Motors Corp., currently produces about 94 million units per year at its seven plants in South Korea, China, Hungary, and Indonesia. The company also supplies to Bayerische Motoren Werke AG, Nissan Motor Co. and Toyota Motor Corp.

“With this newest manufacturing facility in place, we will be able to supply the highest quality tire products that meet fast growing demands from consumers and automakers in the United States,” Hankook Tire Chief Executive Officer Suh Seung Hwa said in the statement.

The company’s shares rose 2.3 percent to 62,900 won at the close in Seoul, the biggest gain since Oct. 1, compared with a 0.2 percent decline in the benchmark Kospi index. Hankook’s stock has risen 34 percent this year.

To contact the reporter on this story: Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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