When Renewable Power Becomes Part Of OE Tyre Competition

Nexen Tire will begin taking renewable electricity under its first direct power purchase agreement in Korea this November, cutting emissions at its Yangsan factory. The volumes are relatively modest, but the commercial context is more significant: European vehicle manufacturers are putting greater emphasis on supply-chain carbon, increasing the importance of how OE tyres are manufactured.

Nexen Tire has signed a direct power purchase agreement with SK Innovation E&S covering approximately 4 MW of onshore wind and solar electricity for its Yangsan plant in South Korea. Supply is due to begin in November 2026, providing around 6 GWh annually and reducing greenhouse gas emissions by an estimated 2,700 tonnes of CO₂ a year, according to the tyre manufacturer.
The agreement is part of a broader shift in Nexen's energy sourcing. At Changnyeong, existing rooftop solar installations operated under lease arrangements are due to move progressively into company-owned generation as contracts expire. Nexen is targeting more than 10 MW of solar capacity there by 2028, which it says would cover about 9% of the plant's electricity consumption, while self-generation is also being considered at Yangsan.

Those figures make the announcement relevant as an operational decarbonisation investment. The more consequential question for the tyre industry, however, is why manufacturers are changing how their factories buy electricity.

Factory Carbon Moves Closer To Purchasing Decisions

Nexen itself connects renewable electricity with competitiveness in the European OE market, where it supplies manufacturers including Mercedes-Benz, BMW, Audi and Porsche. The company argues that demands from vehicle manufacturers to reduce production-related emissions are strengthening, making factory decarbonisation increasingly commercially relevant. That is Nexen's assessment rather than evidence that renewable electricity is a universal pass-or-fail requirement for OE tyre contracts, but there is independent evidence that carbon performance is moving into automotive purchasing decisions.

BMW Group provides one of the clearest examples. The vehicle manufacturer says CO₂e reduction in its supply chain is a key criterion when awarding supplier contracts and that, since 2021, renewable electricity requirements have applied to direct Tier 1 suppliers as well as energy-intensive upstream processes for carbon-intensive components and materials. Its 2024 reporting also said implementation concepts for new suppliers with contractual renewable-electricity requirements were being reviewed before series production.

That matters because it changes the commercial rationale for renewable-energy procurement. Electricity sourcing is no longer relevant only to a tyre manufacturer's corporate emissions target or sustainability report. Where vehicle manufacturers incorporate carbon performance into sourcing criteria, the emissions associated with producing a tyre can become one factor within the wider competition for OE programmes alongside price, technology, performance, capacity, logistics and quality.

The evidence does not yet justify claiming that renewable electricity is essential to winning European OE tyre contracts, or that a tyre manufacturer would lose a nomination because of factory carbon intensity alone. It does show that suppliers increasingly operate within purchasing systems in which emissions reduction can be contractually specified and assessed.

Nexen Is Part Of A Wider Manufacturing Shift

Nexen's agreement is also more meaningful when viewed alongside renewable-power investment elsewhere in tyre manufacturing.

In February 2026, Hankook Tire signed a 10-year power purchase agreement with GoldenPeaks Capital for its Hungarian factory. The agreement covers 430 GWh over its lifetime, equivalent to about 43 GWh annually, with Hankook expecting the renewable electricity to replace roughly 20% of the plant's annual consumption and reduce emissions by around 10,107 tonnes of CO₂ a year.

The scale is substantially greater than Nexen's Yangsan agreement, but both point towards manufacturers adding longer-term renewable-power procurement to existing approaches such as certificates, green tariffs and on-site generation. For tyre businesses, the distinction matters. Each mechanism can have different implications for capital requirements, electricity-price exposure, emissions accounting and the degree to which renewable generation can be associated with manufacturing operations.

Nexen's latest sustainability reporting provides useful context. The company reported a 26% renewable-energy transition rate in 2024 and outlined plans to expand rooftop solar and PPAs alongside its existing use of Green Premium electricity in Korea and renewable-energy certificates at overseas sites. Its subsequent SBTi-approved targets call for Scope 1 and 2 emissions to fall by 58.8% by 2034 from a 2023 baseline, with Scope 3 emissions targeted for a 35% reduction over the same period.

The Yangsan PPA should therefore be viewed as one component of a much larger transition rather than a wholesale decarbonisation of the plant. Its significance lies partly in the procurement mechanism and the direction of travel.

The Next Question Is What OEMs Actually Require

For tyre manufacturers, the unresolved issue is how far these carbon requirements have entered day-to-day OE sourcing.

An OEM can require suppliers to disclose emissions, include carbon in a supplier scorecard, contractually require renewable electricity or make carbon performance an explicit factor in supplier nomination. Those approaches have very different commercial consequences. The next stage for the tyre industry is therefore less about whether vehicle manufacturers want lower supply-chain emissions, which is increasingly well established, and more about the metrics, evidence and thresholds used when contracts are awarded.

There is also an important accounting question. A manufacturer purchasing renewable-energy certificates, signing a direct PPA and installing its own solar generation can legitimately be pursuing the same broad emissions objective, but customers may impose specific rules governing how those measures are recognised. For factories supplying multiple vehicle manufacturers as well as replacement markets, attributing plant-level reductions to individual tyre programmes adds another layer of complexity.

For Nexen, the immediate effect is measurable: 6 GWh of renewable electricity and an expected annual reduction of around 2,700 tonnes of CO₂ once supply starts. The wider significance will depend on something harder to quantify: the extent to which lower-carbon manufacturing influences future OE tyre sourcing decisions.

What can already be established is that renewable electricity is moving beyond the margins of tyre-factory sustainability programmes. Nexen's investment, Hankook's larger Hungarian PPA and BMW's explicit supplier requirements all point towards manufacturing emissions carrying greater weight within the automotive supply chain.

Whether that ultimately makes low-carbon electricity a routine qualification requirement for OE tyre suppliers remains an open question. For manufacturers competing for future vehicle programmes, it is becoming an increasingly important one.

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Tags: Nexen Tire, renewable energy, tyre manufacturing, OE tyres, power purchase agreement, tyre factory emissions, automotive supply chain, SBTi, factory decarbonisation, Hankook Tire, European OEMs

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