Kumho celebrates success while targeting growth

ST. THOMAS, Virgin Islands—The numbers alone for Kumho Tire USA are eye-popping:

• 77.4-percent growth in overall sales in North America in 2022;
• 15-percent year-over-year growth in U.S. sales units, from January to October 2023;
• a half-percent point of market share growth in the U.S. during that time;
• 5,733-percent increase in the operating profit rate in global sales from January to July, compared with 2022.

Overall, the Atlanta-based subsidiary of South Korea's Kumho Tire Co. Inc. expects to sell a million more Kumho tires in the U.S. than it did a year ago.

That growth was on full display in early December, as Kumho Tire USA held its first post-pandemic dealer meeting since 2018. More than 60 people, including 20 customers, attended the five-day event, held at the Ritz Carlton Hotel on St. Thomas in the U.S. Virgin Islands.

"We all know that growth and success doesn't happen without your support and trust," Kumho Tire USA CEO Nam Hwa "Ed" Cho told dealers, noting that in his previous role as head of Kumho's European operations, his unit experienced double-digit growth for three straight years.

"Due to those achievements, my goal here is challenging," he said, "but at the same time, achievable."

Shawn Denlein, Kumho Tire USA's president of sales and marketing, called 2023 a "year of growth for us" along with "a time of experiencing very good financial results."

According to Tire Business' Global Tire Report, Kumho ranks as the No. 16 tire maker in the world, based on sales of $2.76 billion in 2022, trailing No. 14 MRF Ltd. and No. 15 Giti Tire Pte. Ltd. by a little more than $100 million in sales.

Kumho generated more than $1 billion in sales in 2022 in North America for the first time, solidifying the region as the South Korean tire maker's single largest market, representing nearly one-third of global sales revenue. In its 2022 annual report, Kumho said that two price hikes "significantly boosted sales growth" as well as expanding its original equipment supply to popular, and profitable, SUV vehicles.

Denlein said the tire maker has prospered, in part, by focusing on retail sales. This year, the retail side of the market accounted for more than 65 percent of all Kumho Tire USA sales, an increase of more than 14 percentage points from 2022, "thanks to continued focus on this market channel."

The tire maker not only added "80-plus" retail and wholesale dealers, but also simplified its product line. For example, it introduced the Solus TA 51A line that consolidated several lines into one, with more than 82 sizes available.

Another big key for the company came in December with the opening of a 400,000-sq.-ft. distribution center in Dallas that serves customers in 15 Southern and Midwestern states.

The new facility can store 540,000 tires at full capacity. As Kumho's third distribution center in the U.S., it fills a big hole in the midsection of the U.S., complementing Kumho warehouses in Rancho Cucamongo, Calif., and McDonough, Ga.

Now, customers in that region will have a half-million more tires available to them, and they will get product faster. Denlein said Kumho's fill rate in January 2022 sat at 34 percent and stayed below 50 percent for several months thereafter.

But as product began flowing, the fill rate continues to increase, at about 82 percent today. "And we're forecasting it to be 84 percent, 86 percent by the end of the year," he said.

Kumho recently announced it was releasing its first all-weather product, the Solus HA32, designed to provide improved traction in winter conditions for passenger cars, CUVs and SUVs. It is being manufactured at the company's plant in Vietnam.

The tire maker has plans to enter the rugged-terrain market with a new product set for release in 2025, a segment Denlein said accounts for nearly 2 million units in the U.S.

Meanwhile, two other elements of Kumho's portfolio, the OE and commercial business units, are equally successful.

Kumho has 15 key original equipment customers—including Hyundai Motor Co., Kia Corp., Nissan Motor Co. Ltd., BMW A.G. and Volkswagen A.G.—accounting for 54 models and roughly103 SKUs.

OE sales account for 32 percent of the tire maker's overall business, Denlein said.

Kumho's 7-year-old plant in Macon, Ga., with an annual capacity of 3.5 million units, manufactures most of those OE products. Last August, employees at the plant represented by United Steelworkers District 9 overwhelmingly ratified a labor pact with Kumho, guaranteeing four years of labor peace at the plant.

On the commercial side, Denlein said North America has "always" sold out of allocation because of limited capacity.

"We recognize the fact that we have customers that are both TBR (truck/bus tires) and PLT (passenger/ light truck)," Denlein said, "so we want to try to build on that momentum moving forward, especially with our growth."

He said Kumho is in the "early stages of evaluating our structure moving forward, and any investments that we need to make in order to add potentially more production" for commercial customers.

Kumho operates eight plants: three each in South Korea and China, and one in Vietnam, in addition to the U.S. facility. Total capacity is around 63 million units annually.

In the last year, Kumho doubled annual capacity at its Vietnam plant—where the majority of tires sold in North America are manufactured—to nearly 12 million units.

And more product is on the way: Denlein said Kumho is building a smart factory in Korea, which will be dedicated to manufacturing electric-vehicle and premium original equipment product.

The tire maker also has approved plans to build a plant in Europe, the location and timeline of which are to be determined.

All of this is part of Kumho's strategy that Denlein launched in 2018 when he joined the tire maker, with the goal to be recognized as a top Tier 2 tire maker.

"Basically, we see the brand itself as a value brand that is a good choice based on other brands, particularly for customers coming in for Tier 1," he said.

"We're eager to cement ourselves as a top Tier 2 manufacturer."

Denlein acknowledged consumers have little knowledge of the industry's tier structure.

"So it's like more of an industry plan," he said, defining a top Tier 2 brand as one with four pillars: quality products; brand strategy; strong logistics; and profitability for the tire maker and distributors.

A big part of Kumho's brand strategy has been its continuing sponsorship of the NBA (retired NBA all-star Bruce Bowen spoke at the dealer meeting), as well as its outdoor exhibit at the recent SEMA Show in Las Vegas.

Denlein said the tire maker has targeted consumers, ages 18 to 34, using social media influencers and short videos called memes in order to boost engagement and brand awareness among that demographic.

What message does he want his dealer network to know?

"We're focused on growth. But at the same time, we want to do it in a way that is not disruptive," he said. "And we want to align strategically with partners that are willing to grow."

And he wants dealers to know the company will listen.

"We don't have a lot of layers," he said. "And we have done a tremendous amount of collaboration with dealers and listened to the dealers. It's just collaborating with dealers and listening to dealers and what they have to say—(it) just makes you a better company."