June 23, 2014 / 7:21 AM / in 3 years

UPDATE 1-Nexen Tire to invest $1.2 bln in new factory in Czech Republic

* Plans to supply tires to Volkswagen, Skoda and Seat

* Plant will start production in 2018 (Adds the factory’s location and background)

SEOUL, June 23 (Reuters) - South Korean tire maker Nexen Tire Corp said on Monday it plans to build a $1.18 billion production facility in the Czech Republic from 2016 to 2023 to tap into rising demand in Europe and offer stable supplies to automakers like Volkswagen and its Skoda Auto and Seat units.

The investment in the Czech town of Zatec, will be one of the largest ever in the central European state which is recovering from a record-long 18-month recession that ended in 2013.

Nexen Tire said it plans to start production at the factory in 2018 and eventually expand its annual capacity to over 12 million units.

The company, which has manufacturing facilities in South Korea and China, is also a supplier to Hyundai Motor , which has a factory in the Czech Republic.

“Nexen Tire targets not only European carmakers, but the region’s replacement tire market. Local production will help save logistics costs and tariffs,” said Song Sun-jae, an analyst at Hana Daetoo Securities.

The Czech government said it was due to sign an investment contract with Nexen officials on Wednesday and said the spending will create at least 1,000 jobs in the first two phases and that figure could grow later.

$1 = 1,017.80 South Korean won Reporting by Hyunjoo Jin; Additional reporting by Jason Hovet in PRAGUE; Editing by Matt Driskill

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