Due to the impact of high U.S. tariffs, the operating profit of Korea's three tire makers is expected to fall in the third quarter of this year. Hankook Tire & Technology (Hankook Tire & Technology) is also weighed down by the burden from acquiring Hanon Systems, while Kumho Tire is seeing profitability held back by the fire at its Gwangju plant.
According to FnGuide on the 3rd, the combined operating profit of the three domestic tire makers—Hankook, Kumho, and NEXEN TIRE—in the third quarter of this year is expected to decline about 20% from a year earlier.
Hankook Tire & Technology's third-quarter operating profit consensus (average forecast) is 405.7 billion won, down 13.7% from the same period a year earlier. Hankook Tire & Technology is also continuing to bear the profitability burden of Hanon Systems, which it acquired last year. Hanon Systems, which swung to a loss last year with an operating loss of 358.6 billion won, also posted a 37.7 billion won deficit in the first half of this year.
The tariff burden on the three tire makers in the third quarter of this year is estimated at about 115 billion won. Although tariffs are borne by the importer, when passing them on to consumer prices risks dampening demand, export-import corporations often share the cost. North America accounted for an estimated 20%–30% of the three companies' exports last year, putting the estimated burden at about 65 billion won for Hankook Tire & Technology and about 25 billion won each for Kumho Tire and NEXEN TIRE.
Hankook Tire & Technology America is increasing its local sourcing ratio in the United States to mitigate the tariff burden. It plans to complete the expansion of its Tennessee plant by the end of this year and double annual production from 5.5 million tires to 11 million starting next year.
Kumho Tire's third-quarter operating profit is expected to be 95.2 billion won, down 32.1%. Kumho Tire saw a sharper decline in profit after production disruptions caused by a fire at its Gwangju plant in May.
NEXEN TIRE's operating profit is expected to come in at 40.4 billion won, down 22.8%. The only one among the three domestic tire makers without a U.S. plant, NEXEN TIRE is focusing on the European market and has been gradually raising its U.S. market selling prices since May.
The tire industry expects some improvement in fourth-quarter profitability after a Korea-U.S. agreement under which the United States will lower tariffs on Korean-made automobiles and auto parts from the current 25% to 15%.