(Yicai) March 6 -- Guizhou Tyre’s share price rose after the Chinese supplier of commercial vehicle tires said it will meet strong demand by investing USD228 million to build a large new factory in Vietnam.

Guizhou Tyre [SHE: 000589] finished 3.5 percent higher at CNY5.88 (82 US cents) a share in Shenzhen today, after earlier surging by as much as 5.3 percent.

Guizhou Tyre plans to set up the new automated production factory near its plants in Tỉnh Tiền Giang, the Guiyang-based firm said late yesterday. It will have an annual production capacity of 6 million semi-steel radial tires used in passenger cars and cater to overseas markets.

Guizhou Tyre's first Vietnam factory has an annual output capacity of 1.2 million all-steel radial tires, generally used in commercial vehicles. Its other plant makes high-performance all-steel radial tires and can turn out 950,000 units a year.

The new project is expected to become operational at 60 percent of its designed capacity 12 months after construction work starts. It will likely reach full capacity by its fourth year.

The project is likely to average annual sales of USD180 million at full capacity, bringing a profit of USD28.6 million, Guizhou Tyre said. The investment payback period after tax, including construction, is likely just over seven years.

The factory will bolster the production capacity of the entire project area in Vietnam, helping to cut overall production costs, expand the market space, and improve the profitability of Guizhou Tyre's products, according to the company.

Guizhou Tyre’s main products are used on trucks as well as construction and farm machinery. It also makes specialized products such as for heavy off-road vehicles. The firm produced 7.25 million tires in 2022, with overseas sales accounting for about 33 percent of its total.

Editor: Martin Kadiev