Continental to double tire output

A worker checks tire products made in Continental AG's plant in Hefei, capital of Anhui province.[Provided to China Daily]

Continental AG, the German tire and automotive components giant, is confident its 250 million euro ($274 million) expansion, which saw groundbreaking of construction recently at its only factory in China, will help spearhead further expansion in the country and regionally.

Michael Egner, the general manager of Continental Tires (China) Co Ltd, said it has already invested a combined 320 million euros in two previous expansion phases at the site, opened in 2011, which is in the Hefei State High-Tech Industry Development Zone in the Anhui provincial capital.

"It's a huge investment for us, but the money will bring us rewarding returns," said Egner.

After the latest third phase, the plant's annual production capacity will double to around 14 million tires, said Ralf Cramer, its president and chief executive officer in China and a member of Continental AG's executive board.

The plant's expansion represented "a major step to enhancing Continental's position in the Chinese tire industry, as well as in Asia-Pacific region", said Cramer, and the decision to invest further was made despite concerns the Chinese economic slowdown and a market overcapacity could start to hit tire sales.

The China Association of Automobile Manufacturers lowered its growth outlook for 2015 to 3 percent in July from the previously predicted 7 percent made at the beginning of the year.

Data released by the National Statistics Bureau also showed China's total tire output in the first half of the year was 455 million tires, down 3.9 percent from the same period a year ago.

Analysis have suggested both decreases were also as much about punitive duties imposed by the United States on tires imported from China, than any industry slowdown or overcapacity.

However, Continental executives said they remain bullish on the firm's further growth in the market.

Philipp von Hirschheydt, who is responsible for its passenger and light truck replacement-tire business across in Asia-Pacific, said: "Asia is one of our key growth markets, while China is the major player in Asia and the largest automobile market in the world.

"The great potential China has shown is an exciting opportunity for us to seize and we will spare no effort here accordingly."

Hirschheydt claimed in Europe almost a third of cars are equipped with Continental tires, and while no local Chinese market shares were offered, he said expansion of the Hefei plant would give a more solid foundation for its future development and "further enhance our position in the automotive industry".

He said the Hefei plant has seen "stable and continuous growth" since opening, after taking three years to build.

The site is different from Continental's other Asian plants in that 99 percent of production stays in China, and Egner said that 10 million passenger and light-truck tires had already been sold in country by May this year.

Hanover-based Continental is considered the largest German investor in Anhui, a province which has been a long-term partner of Germany's Lower Saxony state for more than 30 years.

Premier Li Keqiang and German counterpart Chancellor Angela Merkel paid a joint visit to Hefei in October.

"Hefei is a central place geographically, enjoying very convenient modern transport facilities, including easy access to the country's high-speed train network," said Egner.