Kumho Tire, South Korea's second-biggest tyre maker, has made a preliminary agreement to invest $US155m to build a plant in Vietnam.

Reuters noted that, like other tyre makers, Kumho is also facing tough global market conditions because of higher raw material costs and a supply glut of tyres, as well as stiff competition from global rivals.

"We signed a memorandum of understanding (MOU) with officials of Becamex, a Vietnamese investment development company, on March 29 to build a factory in Vietnam," Kumho reportedly said in a filing to the Korea Exchange.

The company plans to conclude a final deal in April and to start construction of the plant in the second half of this year, Kumho said, according to the report.

Kumho also said it aimed to complete the construction by the first half of 2008 and to produce 3.15m units in the factory a year, Reuters added.

Kumho, which staged a $363m initial public offering in South Korea and London last February, has three plants in China, two of which are under construction, and another three in South Korea, the news agency noted.

South Korean car makers and parts suppliers have been building overseas plants, seeking lower labour costs and new markets as nearly every South Korean household owns a car, Reuters added.