The largest tire company in Saudi Arabia Kingdom Tyres invites Indonesian companies to build a tire factory in the industrial city of Yanbu, Saudi Arabia.
The Trade Ministry’s Directorate of Export and Import Facilitation has taken proactive measures to follow up on this proposal to engage Indonesian companies. The Trade Ministry on Thursday (11/5) held a meeting with some of the Indonesia’s leading tire manufacturers, who are already exporting their products to Saudi Arabia.
“The cooperation offered by Kingdom Tyres to companies in Indonesia is the supply of raw materials, professional staff, and technical personnel or operators,” said Trade Attaché Riyadh Gunawan on Thursday (18/5).
It is worth noting that this is a follow-up from a previous meeting between the Trade Attaché Riyadh Gunawan and CEO Kingdom Tyres Sulton Alkahtini, discussing potential partnership opportunities between the two countries, on Friday (5/5).
“We will prioritize tire companies in Indonesia as partners. In addition, we have also prepared ourselves by launching a revolutionary breakthrough in the Saudi Arabian tire industry together with potential partners from Indonesia,” Sulton said.
Rising demand for tires in Saudi Arabia
Sulton explained that the marketing target for this tire product aims to meet the demand in the Gulf Cooperation Council (GCC) region, South Asia, Europe, and Africa to establish dominance in tire manufacturing.
With the support of Saudi Arabia’s “Vision 2030”, Kingdom Tyres strives to achieve global leadership in the tire industry through innovation, sustainability, and diversification.
This is in line with the demand for the products that continues to increase every year.
Based on calculations using the Compound Annual Growth Rate (CAGR) method, the demand for tires in Saudi Arabia is 35.70 million units in 2022; 33.05 million units in 2021; 30.6 million units in 2020; 28.48 million units in 2019; 26.4 million units in 2018; 24.4 million units in 2017; and 22.6 million units in 2016.
According to Riyadh Gunawan, this means that the growth demand for tire products has increased by 8 percent per year. Consequently, it is estimated that in 2032 the value of tie demand is expected to soar to 72.32 million units per year.
Indonesian Ambassador to Saudi Arabia Abdul Aziz Ahmad added that the demand for tires in Saudi Arabia continues to increase because most people use cars as a means of transportation.
Assessing Indonesia’s tire industry
Indonesia is one of the main suppliers of tire products to Saudi Arabia. According to the UN Comtrade database, Indonesia exports of rubber tires to Saudi Arabia was valued at US$19.35 million in 2021.
Indonesia has a great comparative advantage over other countries in this regard: its large area of rubber plants. Only Thailand produces more of this raw material. Natural rubber accounts for almost 20% of tire production costs, more than labor costs.
As a result, many large tire manufacturers are represented in the archipelago with state-of-the-art factories such as Bridgestone, Goodyear, Hankook or Michelin. There are a total of 14 tire manufacturers in the country.
The largest manufacturer is Gajah Tunggal, which is just under 49.5% owned by the Singaporean Denham Holdings and 10% Michelin. Gajah Tunggal produced 43 million tires in 2018 according to its annual balance sheet. The second largest producer is Bridgestone with two production sites near Jakarta, in Bekasi and Karawang.
Also among the largest players in the market is Multistrada Arah Sarana (MAS), which exports 80% of its production. MAS was acquired by Michelin in early 2019. The purchase price for 80% of the shares was US$439 million.
