Hyundai Motor cuts dealings with Hankook Tire

By Lee Hyo-sik

Hyundai Motor has slashed dealing with Hankook Tire and is using more Michelin and other imported tires for the new Grandeur and other strategic models, industry analysts said Friday.

Korea’s largest carmaker used to source most of its tires from Hankook and Kumho Tire in the past. But it has recently opted to form a stronger partnership with foreign tire makers as part of efforts to enhance the premium image of its vehicles.

In addition, Hyundai’s unprecedented dispute with Hankook in 2014 over the cause of abnormal noise in its 2013 Genesis premium sedan weakened the partnership, analysts said.

On Tuesday, the automaker unveiled the all-new Grandeur sedan equipped with Michelin tires. It was the first time for Hyundai to equip the Grandeur with imported tires since its first-generation models were launched in 1986.

In addition, the company used tires from Germany-based Continental for its first premium Genesis brand EQ 900 (globally named G90), which was launched last December. Hyundai did not sign a supply deal with Hankook either for its second Genesis brand sedan the G80 and the G80 Sport.

Michelin was chosen as a tire supplier for the firm’s next-generation Ioniq hybrid and electric sedans.

Its affiliate Kia Motors has also begun doing away with Korea’s largest tire maker as it used Michelin tires for its eco-friendly, compact SUV Niro.

“It is true that after we had to spend tens of billions of won to replace defective tires supplied by Hankook Tire, we decided to make more effort to diversify our suppliers,” a Hyundai Motor official said. “We have to say that our dispute with Hankook over the cause of noise in the 2013 Genesis hurt the partnership.”

In 2014, the two were embroiled in a controversy after motorists driving the 2013 Genesis sedans complained about the unusually high level of noise and vibration. Hyundai then tested the vehicle, concluding it was the tires supplied by Hankook that caused the noise.

Hankook disputed Hyundai’s findings, causing the relationship to fracture.

“Because of the increasingly uneasy relations with Hankook, we decided to use more tires produced by Michelin and other global makers to bolster the premium image of our vehicles at home and abroad,” the official said. “These days, we work together with tire makers from the early development stage of new vehicles. Our stance is that we will not rely on one particular supplier.”

Hyundai’s diversification of supply sources has dealt a blow to Hankook, which still heavily depends on domestic carmakers.

The company generates about 30 percent of its sales from supplying tires for newly-launched vehicles. Of the 30 percent, Hyundai accounts for more than 30 percent.

“Hyundai and Kia are our biggest clients. We have and will continue to maintain a strong partnership with them,” a company official said. “Hankook has grown to where it is now, along with Hyundai and Kia. We believe that the carmakers recently used more foreign tires to boost is premium image. But our business dealings have remained strong.”

The official then said Hankook will also boost its partnership with BMW, Mercedes-Benz and other foreign automakers to diversify its revenue sources.

In 2015, the world’s seventh-largest tire maker earned 6.4 trillion won in sales with an 885 billion won operating profit.