Kumho Tire plans to invest KRW1trn (US$750m) in a tyre factory in Europe to meet growing demand from regional automakers. A plant there would also limit the impact of regional geopolitical tensions such as the escalating shipping crisis in the Red Sea.

The South Korean company, taken over by Chinese state owned tyre maker Doublestar group in 2018, hopes to select a location for its first Europe plant by the end of this year, from a short list of Romania, Serbia, Portugal and Turkey, with a feasibility study to also evaluate government subsidies and other local benefits.

Kumho plans initially to supply BMW, Mercedes-Benz, Volkswagen group and Peugeot from its new factory.

Most European demand is currently met from Vietnam with shipments normally routed via the Red Sea.

CEO Jung Il-taik, said: “Considering factors such as the rise in logistics expenses due to the Red Sea crisis, we have decided to build a factory in Europe. We aim to begin construction next year and complete the plant by 2027.”

Kumho currently operates eight factories in South Korea, China, US and Vietnam with combined capacity for 63m tyres per year. The new plant is expected to add 12m.

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Earlier this month, Kumho signed a long awaited technology licensing agreement with Saudi Arabia’s Black Arrow Tire Company (Blatco) for local production and sale of its tyres across the Middle East over 20 years.