YHI steps up a gear in China's car market
In the pipeline is the doubling of production capacity of the Hangzhou factory to 1.4 million Yokohama tyres, says Mr Tay (left). -- LEONG CHAN TEIK
SINGAPORE company YHI International is stepping hard on the accelerator to capture opportunities in the booming car market in China where it has been sole distributor of Yokohama tyres for the past 12 years.
Three key moves it announced to Singapore journalists and analysts visiting its soon-to-be expanded facilities here are:
Doubling the output of a tyre plant in Hangzhou by the end of next year to 1.4 million Yokohama tyres.
YHI's parent company, YHI Holdings, has a 10-percent equity stake in the venture with Yokohama and a local partner.
Producing an additional 20,000 alloy wheels a month, by the first half of next year, at its wholly-owned plant in Shanghai. This will boost its total production to 100,000 units a month.
Negotiating with Hitachi Batteries of Japan to sell more than 350,000 automotive batteries a year to be produced in China by Hitachi's maiden plant there. Negotiations are in their final stages.
In China, sales of new passenger cars are likely to surge past the two-million figure this year, compared to 1.3 million last year.
The high demand has spawned an irony: consumers have to pay more for a set of locally-made car tyres or alloy wheels than their counterparts in Singapore would for equivalent imported goods, says Mr Richard Tay, chairman of recently-listed YHI.
The higher selling price in China, which translates into fat profit margins, prevails despite the relatively low cost of production. Competition from imports is suppressed by a high import tax.
Aside from China, YHI is the established distributor of Yokohama tyres in Asean.
'Demand in China is so good, we transport the tyres straight from the factory to the dealers. We don't need to keep tyres in our warehouse,' said Mr Tay.
YHI's parent company is in a joint venture with Yokohama and Hangzhou Rubber Group which this year set up a US$30-million (S$52.6-million) tyre plant in Hangzhou about three hours' drive from Shanghai.
YHI, which used to source for Yokohama tyres from Japan or those contract-manufactured in China, has built up a network of 148 distributors and 1,018 retailers.
Targeting the thriving Yangtze Delta region of which Shanghai is a part, YHI aims to have 1,200 retailers there by the end of 2005.
As for stores that solely sell Yokohama tyres, YHI intends to raise the number from 12 this year to 40 by next year and 200 by 2006.
All in all, North East Asia - a key part of which is China - is expected to contribute a lot more than last year's 39 per cent to YHI's profit in the next few years, said Mr Tay.
Last year, YHI made a net profit of $11.8 million on sales of $176.9 million.
The Straits Times
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