State-owned Vietnam National Chemical Corporation (Vinachem) has begun a ‘pre-feasibility’ study for construction of a new vehicle tyre plant to expand annual capacity by two million units, a company official told Dow Jones Newswires on Tuesday.

Nguyen Van Vuong, director of Vinachem’s Project Development Department, told Dow Jones Newswires that construction of the plant is expected to begin in the second half of next year.

“We plan to complete all the studies by mid-2004, and if the government approves it, the plant can be built at a cost of $US100 million, with all the funds coming from Vinachem,” Vuong reportedly said.

According to Dow Jones, Vinachem plans to produce 1.12 million truck tyres this year at existing facilities, an increase of 38.8% on year, while the new plant will produce 1 million truck tyres and 1 million passenger car tyres.

Vuong told the news agency that domestic demand for vehicle tyres will rise significantly in the coming years in line with rapid growth in the vehicle industry.

Citing Vietnam Automobile Manufactures Association figures, Dow Jones noted there were 607,400 vehicles registered in Vietnam at the end of last year, and the figure will increase to one million by 2005.

An executive with the state-owned Sao Vang Rubber Company, the country’s second largest tyre maker, told Dow Jones that Vietnam is currently only capable of meeting 30% of the domestic demand for truck tyres, while all car tyres are imported.

“The government is urging all Vietnamese tyre makers to upgrade and expand production to be able meet domestic demand and have products exported from this year,” the executive reportedly said.

Dow Jones said that a Vinachem affiliate, Southern Rubber Industry Corporation (Casumina) exported 35,000 truck tyres to Malaysia and Indonesia in the first five months this year and is building a $5.3 million plant, using Japanese technology, to produce 500,000 car tyres a year from 2004 in south Vietnam.

Dow Jones noted that Vietnam has plenty of natural rubber and is among the world’s largest rubber exporters. Last year, the country shipped 444,000 metric tons of rubber valued at $263 million to overseas markets, the report added.