Continental AG, the Germany-based tyre manufacturer, is seeking a stronger foothold in Southeast Asia by lifting its sales proportion to the Japanese carmakers whose products dominate the regional market.
Photo: Somchai Poomlard
Continental’s market share among Japanese automakers, which account for 70% of all cars and pickup trucks produced in Thailand, for example, is lower than its share among American customers, chief financial officer Wolfgang Schafer said recently in Bangkok.
“Our share in this region is still below our average globally. We normally are in the top five tyre makers worldwide,” he said, adding that Continental was working with Japanese customers on some new deals.
Continental is the world’s fourth largest tyre manufacturer and the second largest auto-parts maker in Europe. It projects that it will be the third-largest tyre maker in China soon.
The company is working more with the Japanese carmakers in Thailand and other Asean countries to introduce its cutting-edge technology tyres. If Continental can secure more orders from Japanese automakers, he said, it is ready to invest more in this region.
Continental has one manufacturing plant in Thailand, at Amata City Industrial Estate in Rayong province. It has two plants in Malaysia, which is a strong base for the German company.
Mr Schafer said expansion into Southeast Asia was also part of the company’s strategy to increase revenue generated from Asia overall, as the region is growing faster than its home base. Continental’s business focus and investment currently is on Asia, with China the largest market.
“Asia and Southeast Asia were not as important for us 20 years ago. But they have been getting more attractive over the last 10 years. The growth here is very impressive,” he said.
Continental began production at its first Chinese plant, located in Hefei in Anhui province, in May 2011. China currently contributes around 3 billion euros in annual revenue to the company, about half of the total for all of Asia, he added.
Despite slowing economic growth in China, the market outlook remains bullish for Continental. Economic expansion in the current range of 7-8% ensures steadily increasing demand for vehicles.
“Besides, the number of second-car buyers is also rising,” said Mr Schafer. “People want to have more than one car.”
However, the company also wants to diversify and reduce overdependence on China. Southeast Asia, which generated 1 billion euros for Continental in 2012, is the logical choice.
“The priority is shifting more to Asean countries, but not away from China,” said Mr Schafer.
Last year, Continental generated 32.7 billion euros in revenue globally, of which approximately 6 billion euros or 18.3% came from Asia. The Asian contribution was three times that of five years ago.
Mr Schafer said the company had set a target for the contribution from Asia to rise to more than 30% within the next five years. In the longer term, it is possible that Asia will be the dominant market for the company.
“The investment from Continental in this region is also increasing. We spend 6-8% of our sales on investment. So, the investment value in Asia is approximately 500 million euros annually,” he added.