Kumho Tire has signed an agreement to transfer its tyre manufacturing technology to Century Engineering Industries of Pakistan. The deal is the first of its kind in the Korean tyre industry and expected to serve as a new approach to entering a developing country market.
Kumho will help Century build technological expertise in tyre manufacturing for ten years until September 2028 in return for an initial lump-sum fee of $5 million along with a running royalty amounting to 2.5 per cent of future sales. The technology transfer contract covers 28 specifications of tyres for passenger and commercial vehicles and is to be renewed every five years after the initial term ends.
A Pakistani-based manufacturer of batteries, particularly those for automobiles, Century has been trying to leverage its growth to enter tyre business since May 2017.
Century plans to build a tyre plant in Pakistan, a country with little infrastructure for tyre manufacturing, and use it as a foundation to expand its business into different branches of the automobile industry. Starting with a million tyres per year, Century aims to increase the plant’s annual production capacity to five million in the long term.
Kumho will not only transfer tyre technology in general but also provide consulting on the entire manufacturing process including standardisation, quality control, and evaluation. It will also train Century employees and offer solutions to issues that may arise during the course of manufacturing.
“Kumho has enjoyed a good reputation as a technology powerhouse. The deal will eliminate concerns caused by some issues over the years such as its acquisition by Doublestar and prove that Kumho’s quality and technology remain intact,” said Kim Jong-ho, CEO of Kumho Tire, “We will leverage this deal as a starting point to establish technology transfer as a new revenue source and develop a variety of business models that build on our expertise in tyre manufacturing in order to further enhance our performance.”