Sun Tyre Profit from Yoong Sing Acquisition
2005
It is now about a year since Sun Tyre acquire Malaysian OTR retreading specialist Yoong Sing and according to Sun Tyre Industries Sdn. Bhd. Executive Director Steven Gan, the acquisition has been a win-win move for both companies.
“Yoong Sing’s strength is in off-the-road (OTR) tyres, and they are one of the major players in the market”, explained Gan. “We have to admit that we were not strong in OTR before the acquisition. We had certain sizes but not a complete range. Now, however, we have the complete range of commercial tyres.”
Sun Tyre acquired 100% of Yoong Sing last year, and they have since shifted all machinery into the company’s Senawang plant. Gan says that had enabled Sun to reduce their overheads substantially as they can now share common utilities in machinery, expertise, resources and management team.
Instead of two management team. Moreover, Yoong Sing still own 25% of the company’s marketing arm and participates actively in the market. Thus, there is a continuality, and most of the manpower is absorbed by Sun Tyre.
“We have absorbed Yoong Sing’s existing business into our network. It is a strategic alliance as we now have a larger network and together with the economies of scale, this makes us very strong in the whole Malaysia OTR market.”
According to Gan, about 90% of the OTR tyres in Malaysia are bias tyres, and the popular size are 20.5 x 25 and 1400 x 25.” OTR tyres are moving gradually towards radialization”, he says, “but of course it will not happen in a short period. This is because OTR radial pricing is still extremely high compared to bias OTR tyres.
When asked the challenge facing the company, Gan explained that the challenge is not so much in retrteading, but in the sourcing of OTR casings.
“The Malaysian rereading market has become very competitive”, commented Gan, justifying the acquisition. “The best way to move forward for smaller retreaders will be to merge with medium sized corporations to become a bigger force. They can reduce their overheads by sharing expertise, machinery and other common utilities. In that way, they will be able to expand and also improve their quality.
Gan also commented on the impact of AFTA on regional retreading markets. According to Gan, retreading will continue to be viable as long as the retreading pricing. Though there are many affordable new tyres from China, the quality of the casings varies from brand to brand and some are not retreadable at all.
Gan stressed that cheap does not always mean good and that one has to take the actual return of investment and the cost per km into account, when new tyres are purchased.
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