Giti Tire Europe – Link Into Europe

Since several years Chinese tyre manufacturers are active on the European tyre market. Although their commitment has been increasing over these years until today there has not been a tyre manufacturer from China that has founded its own representation in Europe which is for example different in the US. Giti Tire Europe B.V. is established in The Netherlands and does not only represent Giti Tire from China but also Gajah Tunggal from Indonesia which belongs to the same corporate group. In doing this, Giti Tire Europe acts as a link between wholesalers such as Romney International, Reifen Gundlach or Doumerc Pneus and the tyre manufacturers Giti Tire China and Gajah Tunggal. Secondly, it acts as an antenna into the European market that detects and collects information and forwards them to China and Indonesia. And thirdly, it is assigned to increase the general coverage of the European markets. Under the direction of well-experienced managers from throughout the continent Giti Tire Europe in particular looks towards the East where markets have an excellent chance to be developed and it also looks towards European OE customers.

It is the team of Giti Tire Europe B.V. – established on December 31, 2005 – that’s of utmost importance in achieving all this. Today, a team of nine tyre specialists is working on the long-term success from the offices in Hilversum, Holland or from within the markets; this team is directed by Wim Reijmerink, general manager Europe. Wim Reijmerink has about 30 years of market experience working for wholesalers and companies from the tyre industry such as Michelin or Goodyear-Dunlop. In his attempt to extend the European markets he is aided by sales director Michael Andre, sales director TBR, OE Helmut Haak and technical sales manager Lennart Lindström. It was a particular decision to found a European team that goes without any supervisor from the corporate headquarters. Although the European subsidiary cannot decide everything by itself, “there’s a lot we can decide,” Mr Reijmerink points out in an interview with Tyres & Accessories. As a matter of fact there is an explicit agenda Giti Tire Europe is mandated for.

Fears in the markets that have been heard occasionally after Giti Tire Europe was established that it would successivly take over responsibilities as a distribution organisation which would sell directly to the tyre trade in Europe – thus to Giti’s and Gajah Tunggal’s current customers’ customers – are nothing but rumours, Mr Reijmerink and his aides emphasise. It was all about “achieving formation work” on the European markets. “We want to increase our market share in Europe together with our distributors. It is not our intention to take away business from our distribution partners,” Wim Reijmerink points out.

On the one hand this means the intensification of the relations to and among importers of GT Radial, Runway (only PC) and Primewell (only truck) tyres in Europe. In this respect Giti Tire Europe represents both Giti Tire China (output 2006: 29.8 million units; turnover $1.467 billion) and Gajah Tunggal (output 2006: 23.5 million units; turnover $622 million). It was – together with the well-established Western markets – in particular the Eastern European markets that would be developed and that offerer good prospects. For example there are no importers of tyres from the Chinese-Indonesian manufacturer in Poland (replacement market 2006: 8.3 million PC tyre) or in Russia (32 million units) at the moment. “This is a gap we want to close and we are proceeding very carefully because we want to find the right partners,” adds Michael Andre who is in charge of to Giti Tire Europe’s relations into the tyre trade. In sum, Giti Tire Europe wants to expand and intensify its European tyre trade basis. “We want to cover the whole European market.”

In the USA GT Radial brand tyres are also sold to OE customers successfully since several years and the manufacturer of these tyres – that are also produced in China – has been receiving two awards in a row from General Motors as “Supplier of the Year.” Now Giti Tire Europe hopes to sign similar OE contracts in Europe as well. According to sales director Helmut Haak who is in charge of OE, there are currently negotiations taking place “with two important OE customers.” In China the company is strongly represented in the domestic OE business with passenger car and truck tyres. In order to get a foot into the door towards European car and truck manufacturers, adds technical sales manager Lennart Lindström, the group is going to invest strongly into additional production capacities as well as into research and development and also into new products that will explicitly be built for the European markets. In the mid-term future a European R&D facility could even be possible in order to better serve customers from the European replacement and original equipment markets. Something similar is not even established in the US.

However, a company does not only sell large quantities of tyres because it has good relations with the tyre trade and with OE customers, says Mr Reijmerink. Furthermore, the brand awareness of tyre brands which are represented by Giti Tire Europe should be increased – and this is first of all the brand GT Radial although the company is following a multi-brand strategy. In order to achieve this the European subsidiary will take appropriate marketing measures as well. This will help supporting all measures already undertaken by the European distributors. These measures are directed partly at the end consumer – through the support of national distributors – as well as at the distributors themselves that are considered to increase their sales figures with the supplier of GT Radial, Primewell and Runway tyres. Last year Giti Tire from China and Gajah Tunggal from Indonesia sold some 5 million passenger car tyres plus about 200,000 truck tyres on the European replacement markets which represents about ten per cent of the annual output of the group. Technically both manufacturers are linked through a holding company established in Singapore.

As mentioned above, the increasing activities in Europe will be supported by an increased expansion of production capacities in China and in Indonesia. Giti Tire China for example currently constructs another PC tyre factory in China. Giti Tire China will start operations by 2008 in its seventh tyre factory on Chinese soil. It is located in the city of Hefei in Anhui province were the company was founded in 1993. When the factory will reach full capacity in 2009/2010 it will produce about 10 million tyres per year. In order to build this new factory Giti Tire China is spending “big money,” says Reijmerink and does not want to disclose the sum the company is investing. In the long-run it was even thinkable to install such a new factory in Europe as well.

Furthermore, it will be likely in the not too far future that Giti Tire Europe installs a small warehouse capacity which will then store small-moving tyres. These tyres will be supplied within days on demand by the European distribution partners that then do not need to keep all these tyres in their own stock anymore. When the new PC tyre factory in Hefei will be fully operational in 2009 and additional organic growth will have been implemented by then, Giti Tire and Gajah Tunggal will have a common production capacity of about 90 million units per year.