Continental Tires plans major retail expansion in China

"Expansion of this business is one of the top initiatives for further sustainable growth for auto industry suppliers," said Ivo Naumann, managing director of AlixPartners.

Although more than 90 percent of Continental's China business comes from tire replacement, the remainder is from the original equipment tire sector, or those which are selected by automakers to come with new vehicles.

Dhillon said he hoped for a more-balanced 65/35 percent split.

He said his confidence in increasing that original equipment, or OE, business comes from not only long-term partnerships with European car brands, but also from rising local Chinese brands.

"The future local production of Volvo and Jaguar Land Rover vehicles will definitely boost our OE business," Dhillon added.

To support its market presence, Continental also expanded its production capacity heavily in 2012, investing 134 million euros ($175 million) in the second phase of its plant in Hefei, which will soon have an annual production capacity of 8 million tires.

The plant is designed to reach a capacity of 16 million.

Italian tire maker Pirelli & C SpA said recently it is planning a $200 million investment to make China its largest global manufacturing base by 2014.

In January, French tire giant Michelin Group said it invested nearly $1.5 billion to open its biggest factory overseas in Shenyang, Liaoning province, to help accelerate its business by two to three times in coming years.

Statistics show that total tire production in China, the world's largest tire consumer, was expected to reach 483 million in 2012, a growth of between 5 and 7 percent on 2011, accounting for almost a third of global output.