Nexen Tire sees growth ahead in North American market

BANFF, Alberta—Two years into his tenure as CEO of Nexen Tire America Inc., Brian Han has come to realize that America is, indeed, a land of opportunity.

And for Seoul, South Korea-based Nexen Tire Corp., the U.S. is a land of opportunity for continued growth, stronger sales and profitability, especially in the off-road and electric-vehicle (EV) segments. That has become clear to Han during his two years stateside in his current role.

"There is a lot of potential for the future," Han said during an exclusive interview with Tire Business.

"The American government is now investing a lot in new technology, like electric vehicles. I think that there are so many opportunities for us. Most of tire manufacturers, including us, are focusing so many further investments in the American market to (capitalize) on this opportunity."

In the year that he's been in the U.S., Reon Ky Kim, the subsidiary's marketing vice president, has seen growth not only in tire sales overall but in the EV market in particular.

"These items are profitable," Kim said. "You can't find another market like the U.S.A. It's our main strategy to focus on this market."

According to Rubber News data, Nexen ranks No. 18 in global tire sales, eclipsing $2.27 billion in sales in 2021, jumping two spots in the rankings. North America accounted for nearly 30% of sales revenue, or roughly $680 million, in 2021.

So it begs the question: Is Nexen considering building a plant in North America in the foreseeable future, especially in the aftermath of pandemic-related supply issues?

The answer, Han said, is yes, in part because of demand from the market and its partners, and in part because of recent legislation that affects the tire industry, including the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.

"If you consider those circumstances," Han said, "I think we need to have some American facility in the future, following this kind of trend."

Nexen operates four plants globally, with combined annual production capacity of 46 million passenger and light truck tires.

By plant, the numbers are: Changnyeong, South Korea, 11 million units/year capacity; Yangsan, South Korea, 19 million units/year; Qingdao, China, 11 million units/year; and Zatec, Czech Republic, 5 million units/year.

Nexen has manufactured more than 500 million tires since 2000 and has not had any recalls in the U.S., according to the company.

All products sold in North America are manufactured in Korea, Nexen said. The plant in the Czech Republic produces many original equipment products used in Europe and abroad.

By 2023, the company is forecasting production capacity to grow to 52 million units per year, up 13 percent over the current capacity.

Han said a U.S. plant would benefit its U.S. customers.

"Every customer and every partner has had (supply) struggles because of the pandemic," he said. "I think we can enhance, improve our service for supplies if we have a American facility and get closer to our customers and partners."

While the timeline for such a facility is unclear, Nexen continues to enhance its American presence on several fronts.

The tire maker recently hosted about 60 top dealers, their spouses and other guests at the Nexen Adventure 2022 in Banff, a five-day event originally scheduled for April 2020 but postponed several times because of the pandemic.

The getaway was held in Banff, a picturesque town in the Canadian Rockies located about 75 miles west of Calgary. Dealers spent the week taking in various activities, including golf, biking, sightseeing, canoing and hiking around glacier-fed Lake Louise.

John Hagan, Nexen's executive vice president of sales, didn't mince words when describing the challenges over the past two years.

"The industry, like all industries, had a supply issue: No containers. No ships. And somehow we all woke up and all the tires were coming at us," Hagan said. "We have been struggling through to get this back in line, and we thank you for your patience.

"It's been a big struggle. The same with pricing challenges. We've been through a lot and the industry has been through a lot."

Hagan said Nexen's fill rates, typically 95 percent, fell to under 79 percent at its low point. But those struggles, he said, are nearly past them.

"Every day we're improving and getting back to where we need to be," Hagan said. "That's been our major challenge to date: Our inventory and getting them into our dealers' hands."

The executives said production never was the issue. Only Nexen's Korean plants were idled briefly during the pandemic.

Shipping constrictions—and securing container space on those ships—was not only a Nexen problem, Hagan said, but also an industry problem.

"I think we're at normal, or pretty damn close," Hagan said. "... We've been able to get the ships' availability, get the containers and get the tires. Where we're seeing the tail end is, our dealers accepting all these tires in and selling them out."

While that issue was playing out, Nexen was grappling with its own logistical issue: Moving its North American headquarters to Northeast Ohio (Richfield) from Southern California (Diamond Bar). The move, carried out in late 2021, meant the company had to find a way to integrate employees under one roof, while hiring staff to fill new openings or positions left vacant when an employee opted not to move across country.

"We've hit our stride," Hagan said. "We had hiccups at the beginning—finding people was our biggest challenge. We struggled with customer service and support because of finding people. Keep in mind, it was that transition of COVID, when people were used to working from home."

The Richfield facility, which opened as a research and development facility in 2019, now houses the corporate staff, the sales staff and R&D—now totaling more than 30 employees—under one roof. The Diamond Bar facility is a call center.

Brand recognition—buoyed of course when Nexen gets a fitment with a top-tier brand, such as Porsche or Volkswagen—continues to be a priority for the tire maker.

Nexen also is working to boost brand awareness through sports sponsorships, including existing partnerships with Manchester City soccer and Anaheim Ducks professional hockey team, according to Jason Yard, marketing director at the company for the past year.

Sports, he said, is an easy way to reach many consumers. He said the company is looking into advertising/promotional opportunities in professional baseball and basketball and college sports.

"There's not too many other ways to reach the amount of people you can (through sports) with simply brand awareness," he said. "And that's what it comes down to, brand awareness and making Nexen a household name."

Kim, the marketing vice president, said he's been surprised at learning how loyal U.S. consumers are to a particular brand. That makes the task even more difficult for a brand such as Nexen.

"I respect our sales team," he said. "They have knocked on doors for a lot of years, (Consumers) have started to accept us. It's really good thing for us. Once they become customers, they will be with us for a long time. That is what I believe."

"It was the right move," Han said. "We always had discussions about doing it, but it came to fruition because of COVID, during a time of uncertainty."

Hagan said the company wanted to build a culture at its Ohio office, thus requiring employees to report to the office.

"The bigger companies have the systems in place that can do it," Hagan said. "We don't have those systems, and I personally think you need to be in the office because the tire industry is so dynamic, so ever changing that you can't wait for a Zoom call.

"By being in the office makes us more flexible and more quick to the market."

The move to Ohio made sense, too, as Nexen pursues expanding its OE business. In 2022, Nexen had 130 fitments, including with brands such as Hyundai, Kia, Jeep, Volkswagen and Porsche. Expect more to follow, Nexen said, particularly as the tire maker ramps up its EV products.

"We're really trying to improve our fitments going forward," Hagan said. "We're trying to do as much as we can to improve our OE fitments in the United States because we know if we get a good solid OE fitments, it helps the brand and it also helps the replacement market in the future."

Hagan said Nexen has grown significantly since he joined the company in 2016. First, he said, communication with dealers has improved tenfold.

"We have been able to turn around decisions in a very quick manner," he said. "We try to run by the rule that within 24 hours, we will get back to you. Some decisions are easy; some require a little more work. But directionally, we will get back to you one way or the other within 24 hours."

He lauded the dealer programs the company offers, especially the speed at which it handles payouts.

"When a quarter closes, most manufacturers take 30 to 45 days if not more, and we were one of them a long time ago, and we are now within 15 days," he said. "The checks are going out."

And he said the company's flexibility is one of its strengths.

"We're here to support (dealers)," he said. "It's not a one-sided partnership. We have striven over the years and continue to work with our dealer base to say, 'Hey, you have a problem? Put it on the table. Let's discuss it.' Sometimes you win, sometimes we win. But at the end of the day, we are working together for one cause."

He said Nexen parted ways with some dealers because the relationship was one-sided.

"That just doesn't work with our DNA," he said. "Our DNA is teamwork, communication, working together. That's what our dealers know, and a lot of our new dealers, we try to stress that as much as possible."