Pirelli to Continue its Forward Looking Strategy in China

Under the leadership of Dr Francesco Gori, Pirelli’s tyre division is accelerating the pursuit of its forward looking strategy. On November 27, 2007, Pirelli officially opened its new passenger car tyre factory in Yanzhou, Shandong province and presented the facility to the Chinese media. Tyres & Accessories and its German sister publication Neue Reifenzeitung were the only international tyre publications in attendance. In the first phase Pirelli will produce about 3 million passenger car tyres per year, ranging between 14 and 18 inches in diameter. In a fast second step, this capacity will be expanded up to 5 million units. The premises even allow for a future expansion of the production site up to a capacity of 10 million passenger car tyres. German manager, Michael Beck (44), has taken over the responsibility of the Pirelli factory. For him it is a pleasure to have had the chance to build a factory on a greenfield site with the benefit of an ideal flow of goods and materials.

With regards to equipment Pirelli’s new PC tyre factory is one of the most modern facilities the tyre manufacturer runs, MIRS factories aside. The output is intended for the Chinese tyre market, but also for South East Asia and Australia as well as Northern America where Pirelli urgently needs additional tyres. Three years ago Pirelli installed a truck tyre factory on the same site as the new PC tyre facility. This factory will soon reach its maximum capacity on schedule and then will add an annual output of 1 million large truck tyres, of which the majority will be tube type tyres. However, over the past months, Pirelli has produced more and more tube-less truck tyres in Yanzhou. Initially, Pirelli had planned to sell a major part of its truck tyre output in the whole of the South East Asian region. This plan was soon put aside in light of dramatically growing demand on the domestic Chinese truck tyre market. China already is the largest single truck tyre market in the world and is consuming Pirelli’s truck tyres fresh from the vulcanising presses.

The new passenger car tyre factory was built together with Pirelli’s truck tyre joint venture partner. Since the two partners started producing truck tyres in China three years ago, Pirelli has gained a majority share of 75 per cent of the joint venture holding company and it can be expected that with every single increase of capital Pirelli’s share in the company further grow.

On the occasion of the official opening of the new PC tyre factory, Pirelli’s chairman Marco Tronchetti Provera as well as Dr Francesco Gori, the CEO of Pirelli Tyre, representatives from the Chinese jointventure partner, delegates of the Shandong province as well as the Italian ambassador for China were present in Yanzhou. During the past three years Pirelli has invested more than $200 million into the site. It is very likely that this sum will be doubled within the next three years. The truck tyre factory currently employs about 1,000 people. The passenger car tyre factory will hire another 1,000 employees. Pirelli already has a well-established distribution network available in China which is expected to grow up to 1,000 point of sale by early next year. Two thirds of these dealers will be so-called mono-brand dealers.

Talking to Tyres & Accessories, Francesco Gori points out that tyres produced in the new PC tyre factory in China are not designated for sale on the European tyre markets. This comes as no surprise because just a few months ago Pirelli opened a passenger car tyre factory in Slatina, Romania. This facility has a similar size and is equally modern as the new tyre factory in China.