Kumho Signs Technology Transfer Deal with Century
- Century will pay $5 million in technology transfer fee in addition to a running royalty amounting to 2.5% of future sales.
- The ten-year deal ends in September 2028 and is to be renewed every five years.
Kumho Tire (CEO: Kim Jong-ho) signed an agreement to transfer its tire manufacturing technology to Century Engineering Industries of Pakistan at its headquarters in Seoul on Thursday morning. The deal is the first of its kind in the Korean tire industry and expected to serve as a new approach to entering a developing country market.
Kumho will help Century build technological expertise in tire manufacturing for ten years until September 2028 in return for an initial lump-sum fee of $5 million along with a running royalty amounting to 2.5% of future sales. The technology transfer contract covers 28 specifications of tires for passenger and commercial vehicles and is to be renewed every five years after the initial term ends.
A Pakistani-based manufacturer of batteries, particularly those for automobiles, Century has been trying to leverage its growth to enter tire business since May 2017. The company made a technology transfer proposal to Kumho after a series of negotiations with global tire manufacturers as it was impressed by the Korean tire maker’s technological prowess.
Century plans to build a tire plant in Pakistan, a country with little infrastructure for tire manufacturing, and use it as a foundation to expand its business into different branches of the automobile industry. Starting with a million tires per year, Century aims to increase the plant’s annual production capacity to five million in the long term.
Kumho will not only transfer tire technology in general but also provide consulting on the entire manufacturing process including standardization, quality control, and evaluation. It will also train Century employees and offer solutions to issues that may arise during the course of manufacturing.
“Kumho has enjoyed a good reputation as a technology powerhouse. The deal will eliminate concerns caused by some issues over the years such as its acquisition by Doublestar and prove that Kumho’s quality and technology remain intact,” said Kim Jong-ho, CEO of Kumho Tire, “We will leverage this deal as a starting point to establish technology transfer as a new revenue source and develop a variety of business models that build on our expertise in tire manufacturing in order to further enhance our performance.”